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**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington,D.C. 20549**

 

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**Form 10-Q**

 

**x****      QUARTERLY REPORT PURSUANT TOSECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934**

 

**For the quarterly period ended March 31,2010**

 

**OR**

 

**o****         TRANSITION REPORTPURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF1934**

 

**For thetransition period from           to         **

 

**CommissionFile Number 001-12593**

 

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**Atlantic Tele-Network, Inc.**

(Exactname of registrant as specified in its charter)

 

| **Delaware**                                                     | ** ** | **47-0728886**                           |
|------------------------------------------------------------------|------------|------------------------------------------|
| (State or other  jurisdiction of  incorporation or organization) |       | (I.R.S. Employer  Identification Number) |

 

**10Derby Square**

**Salem,MA 01970**

(Addressof principle executive offices, including zip code)

 

**(978)619-1300**

(Registrant’stelephone number, including area code)

 

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Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during the preceding 12months (or for such shorter period that the registrant was required to filesuch reports), and (2) has been subject to such filing requirements forthe past 90 days.Yes xNo o

 

Indicateby check mark whether the registrant has submitted electronically and posted onits corporate Web site, if any, every Interactive Data File required to besubmitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 ofthis chapter) during the preceding 12 months (or for such shorter period thatthe registrant was required to submit and post such files). Yes o No o

 

Indicate by check mark whether the registrant is alarge accelerated filer, an accelerated filer, a non-accelerated filer, or asmaller reporting company. See definitions of “large accelerated filer,”“accelerated filer,” and “smaller reporting company” in Rule 12b-2 of theExchange Act. (Check one):

 
| Large accelerated filer  o                     | Accelerated filer x          |
|------------------------------------------------|-----------------------------------|
|                                           |                              |
| Non-accelerated filer o                        | Smaller reporting  company o |
| (Do not check if a  smaller reporting company) |                              |

 

Indicate by check mark whether the registrant is ashell company (as defined in Rule 12b-2 of the Exchange Act):Yes oNo x

 

As of May 10, 2010,the registrant had outstanding 15,282,785 shares of its common stock ($.01 parvalue).

 

 

 

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**ATLANTIC TELE-NETWORK, INC.**

 

FORM 10-Q

QuarterEnded March 31, 2010

 
| CAUTIONARY STATEMENT REGARDING FORWARD LOOKING  STATEMENTS | 3                                                                                                         |
|------------------------------------------------------------|-----------------------------------------------------------------------------------------------------------|
|                                                       |                                                                                                      |   |
| PART I—FINANCIAL INFORMATION                     | 4                                                                                                         |
|                                                       |                                                                                                      |   |
| Item 1                                                | Unaudited Condensed  Consolidated Financial Statements                                                    | 4 |
|                                                       |                                                                                                      |   |
|                                                       | Condensed  Consolidated Balance Sheets at December 31, 2009 and March 31, 2010                  | 4 |
|                                                       |                                                                                                      |   |
|                                                       | Condensed  Consolidated Income Statements for the three months ended March 31, 2009  and 20010       | 5 |
|                                                       |                                                                                                      |   |
|                                                       | Condensed  Consolidated Statements of Cash Flows for the three months ended  March 31, 2009 and 2010 | 6 |
|                                                       |                                                                                                      |   |
|                                                       | Notes to Unaudited Condensed Consolidated Financial  Statements                                           | 7-17 |
|                                                       |                                                                                                      |   |
| Item 2                                                     | Management’s  Discussion and Analysis of Financial Condition and Results of Operations               | 18-29 |
|                                                       |                                                                                                      |   |
| Item 3                                                     | Quantitative  and Qualitative Disclosures About Market Risk                                               | 29 |
|                                                       |                                                                                                      |   |
| Item 4                                                     | Controls and  Procedures                                                                                  | 29 |
|                                                       |                                                                                                      |   |
| PART II—OTHER  INFORMATION                       | 31                                                                                                        |
|                                                       |                                                                                                      |   |
| Item 1                                                     | Legal Proceedings                                                                                         | 31 |
|                                                       |                                                                                                      |   |
| Item1A                                                     | Risk Factors                                                                                              | 31 |
|                                                       |                                                                                                      |   |
| Item 2                                                     | Unregistered  Sales of Equity Securities and Use of Proceeds                                              | 34 |
|                                                       |                                                                                                      |   |
| Item 6                                                     | Exhibits                                                                                                  | 35 |
|                                                       |                                                                                                      |   |
| SIGNATURES                                                 |                                                                                                      |
|                                                       |                                                                                                      |   |
| CERTIFICATIONS                                             |                                                                                                      |

 

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**Cautionary Statement Regarding Forward-LookingStatements**

** **

This Quarterly Report on Form10-Q (or the “Report”) contains forward-looking statements relating to, amongother matters, the future financial performance and results of operations ofthe Company as a whole; the competitive environment in our key markets, demandfor our services and industry trends; the outcome of litigation and regulatorymatters; our continued access to the credit and capital markets; the pace ofour network expansion and improvement, including our realization of thebenefits of these investments; and management’s plans and strategy for thefuture.  These forward-looking statementsare based on estimates, projections, beliefs, and assumptions and are notguarantees of future events or results. Actual future events and results could differ materially from the eventsand results indicated in these statements as a result of many factors,including, among others, (1) our ability to operate a large scale retailwireless business in the United States and integrate these operations into itsexisting operations; (2)  the generalperformance of the acquired Alltel operations, including operating margins andthe future retention and turnover of the acquired subscriber base; (3) significantpolitical and regulatory uncertainty facing our exclusive license to providelocal exchange and international voice and data services in Guyana; (4) anysignificant decline in the price or volume, including as a result of bypassactivities, of international long distance calls to Guyana; (5) the regulationof rates that we may charge for local wireline telephone service; (6) significanttax disputes that we have with the Guyanese tax authorities; (7) our ability tomaintain favorable roaming arrangements; (8) the current difficult globaleconomic environment, along with difficult and volatile conditions in thecapital and credit markets; (9) increased competition; (10) economic, politicaland other risks facing our foreign operations; (11) regulatory changesaffecting our businesses; (12) the loss of certain FCC and other licenses; (13)rapid and significant technological changes in the telecommunications industry;(14) our reliance on a limited number of key suppliers and vendors for timelysupply of equipment and services relating to our network infrastructure; (15)any loss of any key members of management; (16) the adequacy and expansioncapabilities of our network capacity and customer service system to support ourcustomer growth; (17) dependence of our wireless and wireline revenue on thereliability and performance of our network infrastructure; (18) the occurrenceof severe weather and natural catastrophes; and (19) our ability to realize thevalue that we believe exists in businesses that we acquire. These and otheradditional factors that may cause actual future events and results to differmaterially from the events and results indicated in the forward-lookingstatements above are set forth more fully under Item 1A “Risk Factors” of thisReport as well as the Company’s Annual Report on Form 10-K for the year ended December31, 2009, which is on file with the SEC. The Company undertakes no obligationto update these forward-looking statements to reflect actual results, changesin assumptions or changes in other factors that may affect such forward-lookingstatements.

 

In this Report the words “theCompany”, “we,” “our,” “ours,” “us” and “ATN” refer to Atlantic Tele-Network, Inc.and its subsidiaries, unless the context indicates otherwise. This Reportcontains trademarks, service marks and trade names that are the property ofATN, its subsidiaries and others.

 

Reference to dollars ($)refer to U.S. dollars unless otherwise specifically indicated.

 

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**PART I—FINANCIALINFORMATION**

**Item 1.  Unaudited Condensed Consolidated FinancialStatements**

** **

**ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

**(Dollars in thousands, except pershare amounts)**

 
| ** **                                                                                                                                                                                     | ** ** | **December 31,  2009** | ** ** | **March 31,  2010** | ** ** |
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| **ASSETS**                                                                                                                                                                                     |       |                        |       |                     |       |
| Current Assets:                                                                                                                                                                                |       |                        |       |                     |       |
| Cash and cash equivalents                                                                                                                                                                      |       | $                           | 90,247     |                     | $          | 79,028 |   |
| Restricted cash                                                                                                                                                                                |       | 5,248                       |       | 2,386                    |       |
| Accounts receivable, net of allowances of $4.2  million and $4.5 million, respectively                                                                                                         |       | 26,831                      |       | 27,530                   |       |
| Materials and supplies                                                                                                                                                                         |       | 5,917                       |       | 5,644                    |       |
| Deferred income taxes                                                                                                                                                                          |       | 3,046                       |       | 3,046                    |       |
| Prepayments and other current assets                                                                                                                                                           |       | 5,226                       |       | 4,558                    |       |
| Total current assets                                                                                                                                                                           |       | 136,515                     |       | 122,192                  |       |
| Fixed asset, net                                                                                                                                                                               |       | 217,015                     |       | 224,304                  |       |
| Licenses                                                                                                                                                                                       |       | 34,830                      |       | 34,963                   |       |
| Goodwill                                                                                                                                                                                       |       | 40,361                      |       | 40,361                   |       |
| Other intangibles, net                                                                                                                                                                         |       | 1,848                       |       | 1,760                    |       |
| Deferred income taxes                                                                                                                                                                          |       | 9,085                       |       | 9,648                    |       |
| Other assets                                                                                                                                                                                   |       | 6,900                       |       | 9,969                    |       |
| Total assets                                                                                                                                                                                   |       | $                           | 446,554    |                     | $          | 443,197 |   |
| **LIABILITIES AND  STOCKHOLDERS’ EQUITY**                                                                                                                                                 |       |                        |       |                     |       |
| Current Liabilities:                                                                                                                                                                           |       |                        |       |                     |       |
| Current portion of long-term debt                                                                                                                                                              |       | $                           | 3,694      |                     | 3,694      |   |
| Accounts payable and accrued liabilities                                                                                                                                                       |       | 29,717                      |       | 29,707                   |       |
| Dividends payable                                                                                                                                                                              |       | 3,055                       |       | —                   |       |
| Accrued taxes                                                                                                                                                                                  |       | 9,900                       |       | 6,372                    |       |
| Advance payments and deposits                                                                                                                                                                  |       | 3,756                       |       | 3,737                    |       |
| Other current liabilities                                                                                                                                                                      |       | 6,765                       |       | 6,278                    |       |
| Total current liabilities                                                                                                                                                                      |       | 56,887                      |       | 49,788                   |       |
| Deferred income taxes                                                                                                                                                                          |       | 32,171                      |       | 32,165                   |       |
| Other liabilities                                                                                                                                                                              |       | 5,512                       |       | 6,334                    |       |
| Long-term debt, excluding current portion                                                                                                                                                      |       | 69,551                      |       | 68,662                   |       |
| Total liabilities                                                                                                                                                                              |       | 164,121                     |       | 156,949                  |       |
| Commitments and contingencies (Note 11)                                                                                                                                                        |       |                        |       |                     |       |
| Atlantic Tele-Network, Inc.’s Stockholders’  Equity:                                                                                                                            |       |                        |       |                     |       |
| Preferred stock, $0.01 par value per share;  10,000,000 shares authorized, none issued and outstanding                                                                                         |       | —                      |       | —                   |       |
| Common stock, $0.01 par value per share; 50,000,000  shares authorized; 15,732,382 and 15,780,632 shares issued, respectively, and  15,233,745 and 15,282,785 shares outstanding, respectively |       | 158                         |       | 158                      |       |
| Treasury stock, at cost; 498,637 and 497,847  shares, respectively                                                                                                                             |       | (4,687                      | )          | (4,680                   | )          |
| Additional paid-in capital                                                                                                                                                                     |       | 108,720                     |       | 109,068                  |       |
| Retained earnings                                                                                                                                                                              |       | 156,827                     |       | 160,833                  |       |
| Accumulated other comprehensive loss                                                                                                                                                           |       | (5,272                      | )          | (5,764                   | )          |
| Total Atlantic Tele-Network, Inc’s stockholders’  equity                                                                                                                             |       | 255,746                     |       | 259,615                  |       |
| Non-controlling interests                                                                                                                                                                      |       | 26,687                      |       | 26,633                   |       |
| Total equity                                                                                                                                                                                   |       | 282,433                     |       | 286,248                  |       |
| Total liabilities and equity                                                                                                                                                                   |       | $                           | 446,554    |                     | $          | 443,197 |   |

 

The accompanyingcondensed notes are an integral part of these condensed consolidatedfinancial statements.

 

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATEDINCOME STATEMENTS**

**FOR THE THREE MONTHSENDED MARCH 31, 2009 and 2010**

**(Unaudited)**

**(Dollars in thousands,except per share amounts)**

 
| ** **                                                                                                                                       | ** ** | **Three Months Ended  March 31,** | ** ** |
|--------------------------------------------------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                                                                       | ** ** | **2009**                                         | ** ** | **2010** | ** ** |
| **REVENUE:**                                                                                                                                     | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Wireless                                                                                                                                         |       | $                                                | 31,725     |   | $ | 33,122 |   |
| Local telephone and data                                                                                                                         |       | 13,053                                           |       | 13,704 |   |
| International long distance                                                                                                                      |       | 10,401                                           |       | 7,859 |   |
| Other                                                                                                                                            |       | 787                                              |       | — |   |
| Total revenues                                                                                                                                   |       | 55,966                                           |       | 54,685 |   |
| **OPERATING EXPENSES**(*excluding depreciation and amortization unless otherwise indicated*):                                                    | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Termination and access fees                                                                                                                      |       | 10,446                                           |       | 10,677 |   |
| Internet and programming                                                                                                                         |       | 789                                              |       | 421 |   |
| Engineering and operations                                                                                                                       |       | 6,947                                            |       | 6,412 |   |
| Sales and marketing                                                                                                                              |       | 3,592                                            |       | 4,105 |   |
| General and administrative                                                                                                                       |       | 8,215                                            |       | 10,786 |   |
| Acquisition-related charges                                                                                                                      |       | —                                           |       | 4,793 |   |
| Depreciation and amortization                                                                                                                    |       | 9,200                                            |       | 10,069 |   |
| Total operating expenses                                                                                                                         |       | 39,189                                           |       | 47,263 |   |
| Income from operations                                                                                                                           |       | 16,777                                           |       | 7,422 |   |
| **OTHER INCOME (EXPENSE):**                                                                                                                      | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Interest expense                                                                                                                                 |       | (1,157                                           | )          | (1,266 | ) |
| Interest income                                                                                                                                  |       | 340                                              |       | 154 |   |
| Other income, net                                                                                                                                |       | 26                                               |       | 4 |   |
| Other income (expense), net                                                                                                                      |       | (791                                             | )          | (1,108 | ) |
| **INCOME BEFORE INCOME TAXES**                                                                                                                   |       | 15,986                                           |       | 6,314 |   |
| Income taxes                                                                                                                                     |       | 6,956                                            |       | 2,456 |   |
| **NET INCOME**                                                                                                                                   |       | 9,030                                            |       | 3,858 |   |
| Less: Net income attributable to non-controlling  interests, net of tax of $0.7 million for the three months ended  March 31, 2009 and 2010 |       | (228                                             | )          | 148 |   |
| **NET INCOME ATTRIBUTABLE TO  ATLANTIC TELE-NETWORK, INC. STOCKHOLDERS**                                                                         |       | $                                                | 8,802      |   | $ | 4,006 |   |
| **NET INCOME PER WEIGHTED AVERAGE  SHARE****ATTRIBUTABLE TO ATLANTIC TELE-NETWORK, INC.****STOCKHOLDERS:**                                       |       |                                             |       |   |   |
| Basic                                                                                                                                            |       | $                                                | 0.58       |   | $ | 0.26 |   |
| Diluted                                                                                                                                          |       | $                                                | 0.58       |   | $ | 0.26 |   |
| **WEIGHTED AVERAGE COMMON SHARES  OUTSTANDING:**                                                                                                 | ** ** | ** **                                       | ** ** |   | ** ** |
| Basic                                                                                                                                            |       | 15,229                                           |       | 15,260 |   |
| Diluted                                                                                                                                          |       | 15,250                                           |       | 15,447 |   |
| **DIVIDENDS PER SHARE APPLICABLE  TO COMMON STOCK**                                                                                              |       | $                                                | 0.18       |   | $ | 0.20 |   |

 

The accompanyingcondensed notes are an integral part of these condensed consolidatedfinancial statements.

 

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**ATLANTICTELE-NETWORK, INC. AND SUBSIDIARIES**

**CONDENSED CONSOLIDATEDSTATEMENTS OF CASH FLOWS**

**FOR THE THREE MONTHSENDED MARCH 31, 2009 AND 2010**

**(Unaudited)**

**(Dollars in thousands)**

 
| ** **                                                                                              | ** ** | **Three Months Ended  March 31,** | ** ** |
|---------------------------------------------------------------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                                                                              | ** ** | **2009**                                         | ** ** | **2010** | ** ** |
| **CASH FLOWS FROM OPERATING ACTIVITIES:**                                                               | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Net  income                                                                                             |       | $                                                | 9,030      |   | $ | 3,858 |   |
| Adjustments  to reconcile net income to net cash flows provided by operating activities:                |       |                                             |       |   |   |
| Depreciation  and amortization                                                                          |       | 9,200                                            |       | 10,069 |   |
| Provision  for doubtful accounts                                                                        |       | 408                                              |       | (139 | ) |
| Amortization  of debt discount and debt issuance costs                                                  |       | 133                                              |       | 287 |   |
| Stock-based  compensation                                                                               |       | 300                                              |       | 355 |   |
| Deferred  income taxes                                                                                  |       | 199                                              |       | (235 | ) |
| Changes  in operating assets and liabilities, excluding the effects of acquisitions:                    |       |                                             |       |   |   |
| Accounts  receivable                                                                                    |       | (3,228                                           | )          | (560 | ) |
| Materials  and supplies, prepayments, and other current assets                                          |       | 3,482                                            |       | 941 |   |
| Accounts  payable and accrued liabilities, advance payments and deposits and other  current liabilities |       | (2,348                                           | )          | (1,022 | ) |
| Accrued  taxes                                                                                          |       | (387                                             | )          | (3,534 | ) |
| Other                                                                                                   |       | (43                                              | )          | 68 |   |
| Net  cash provided by operating activities                                                              |       | 16,746                                           |       | 10,088 |   |
| **CASH FLOWS FROM INVESTING ACTIVITIES:**                                                               |       |                                             |       |   |   |
| Capital  expenditures                                                                                   |       | (9,980                                           | )          | (16,889 | ) |
| Acquisitions  of businesses                                                                             |       | (24                                              | )          | — |   |
| Acquisitions  of assets                                                                                 |       | —                                           |       | (57 | ) |
| Decrease  in restricted cash                                                                            |       | —                                           |       | 2,862 |   |
| Net  cash used in investing activities                                                                  |       | (10,004                                          | )          | (14,084 | ) |
| **CASH FLOWS FROM FINANCING ACTIVITIES:**                                                               | ** ** | ** **                                       | ** ** | ** ** | ** ** |
| Dividends  paid on common stock                                                                         |       | (2,741                                           | )          | (3,055 | ) |
| Distributions  to non-controlling interests                                                             |       | (1,634                                           | )          | (31 | ) |
| Payments  of debt issuance costs                                                                        |       | —                                           |       | (3,339 | ) |
| Repayments  of long-term debt                                                                           |       | (188                                             | )          | (923 | ) |
| Investments  made by non-controlling interests                                                          |       | —                                           |       | 125 |   |
| Purchase  of common stock                                                                               |       | (23                                              | )          | — |   |
| Net  cash provided by (used in) financing activities                                                    |       | (4,586                                           | )          | (7,223 | ) |
| **NET CHANGE IN CASH AND CASH EQUIVALENTS**                                                             |       | 2,156                                            |       | (11,219 | ) |
| **CASH AND CASH EQUIVALENTS, beginning of the  period**                                                 |       | 79,665                                           |       | 90,247 |   |
| **CASH AND CASH EQUIVALENTS, end of the period**                                                        |       | $                                                | 81,821     |   | $ | 79,028 |   |

 

Theaccompanying condensed notes are an integral part of these condensedconsolidated financial statements.

 

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**ATLANTIC TELE-NETWORK, INC. AND SUBSIDIARIES**

**NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIALSTATEMENTS**

 

**1.ORGANIZATION AND BUSINESS OPERATIONS**

 

Atlantic Tele-Network, Inc.(“ATN” or “Company”) provides wireless and wireline telecommunication servicesin North America and the Caribbean through the following operatingsubsidiaries:

 

·Allied Wireless CommunicationsCorporation (“AWCC”), a provider of wireless voice and data services to retailand business customers in six states in the rural U.S., operating under the “Alltel”brand.  AWCC, a wholly owned subsidiaryof the Company, began service following the Company’s acquisition of formerAlltel assets from Verizon Wireless in April 2010.  The Company will consolidate AWCC’s financialresults beginning on April 26, 2010.

 

·Commnet Wireless, LLC (“Commnet”),an owner and operator of wholesale wireless networks in rural areas of theUnited States. Commnet provides wireless voice and data communications roamingservices principally to national, regional and local wireless carriers. Commnetgenerated approximately 39% and 42% of the Company’s consolidated revenues forthe three months ended March 31, 2009 and 2010, respectively. ATN acquireda 95% equity interest in Commnet in 2005 and acquired the remaining 5% equityinterest in 2007.

 

· Guyana Telephone & TelegraphCompany, Ltd. (“GT&T”), the exclusive provider of local exchange andinternational long distance telecommunications services in the Republic ofGuyana.  GT&T is also one of twoservice providers in Guyana’s competitive wireless telecommunications market. We have owned80% of the stock of GT&T since January 1991.GT&T generatedapproximately 41% and 39% of the Company’s consolidated revenues for the threemonths ended March 31, 2009 and 2010, respectively.

 

·Bermuda Digital Communications, Ltd.(“BDC”), a leading wireless voice and data communications service provider inBermuda, doing business under the name “Cellular One”. The Company acquired anequity interest in, and signed a management contract with, BDC in 1998.  During 2008, BDC completed a share repurchaseof its common stock. ATN did not tender any shares for repurchase, and, as aresult of the transaction, increased its holdings from approximately 43% toapproximately 58% of BDC’s outstanding common stock.  In 2008, BDC began providing wirelessservices in Turks and Caicos through Islandcom Telecommunications, Ltd.

 

·Sovernet, Inc. (“Sovernet”), afacilities-based integrated voice, broadband data communications and dial-upservice provider in New England and New York State. Sovernet’s retailtelecommunications service is delivered to business and residential customersin Vermont and New Hampshire. Sovernet also delivers wholesale transportservices in New York State through its majority-owned subsidiary, ION Holdco,LLC. Sovernet currently holds 75% of the equity interests in ION.

 

·Choice Communications, LLC (“Choice”),a leading provider of fixed and portable wireless broadband data and dial-upinternet services to retail and business customers in the U.S. Virgin Islands.Choice was acquired by ATN in 1999 and is a wholly owned subsidiary of theCompany. Choice discontinued its wireless television service on May 31,2009 to focus mainly on providing wireless broadband data services.

 

ATN provides management,technical, financial, regulatory, and marketing services to its subsidiariesand typically receives a management fee equal to approximately 3% to 5% oftheir respective revenues. Management fees from consolidated subsidiaries areeliminated in consolidation.

 

**2.  BASIS OF PRESENTATION**

 

The accompanyingcondensed consolidated financial statements have been prepared by the Companypursuant to the rules and regulations of the Securities and ExchangeCommission (“SEC”). The financial information included herein is unaudited;however, the Company believes such information and the disclosures herein areadequate to make the information presented not misleading and reflect alladjustments (consisting only of normal recurring adjustments) that arenecessary for a fair statement of the Company’s financial position and resultsof operations for such periods. The year-end condensed balance sheet data wasderived from audited financial statements, but does not include all disclosuresrequired by accounting principles generally accepted in the United States ofAmerica.  Results of interim periods may not be indicative of resultsfor the full year.  These condensed consolidated financial statements andrelated notes should be read in conjunction with the Company’s 2009 AnnualReport on Form 10-K.

 

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***Consolidation***

 

The consolidatedfinancial statements include the accounts of the Company, its majority-ownedsubsidiaries and certain entities, which are consolidated in accordance withthe provisions of Financial Accounting Standards Board (“FASB”) authoritativeguidance on the consolidation of variable interest entities since it isdetermined that the Company is the primary beneficiary of these entities. Revenuefrom these entities constitutes less than 1% of total Company revenue.

 

***Recent AccountingPronouncements***

 

In January 2010, the FASB issued updated guidanceto amend the disclosure requirements related to recurring and nonrecurring fairvalue measurements. This update requires new disclosures on significanttransfers of assets and liabilities in and out of Level 1 and Level 2 of thefair value hierarchy (including the reasons for these transfers) and alsorequires a reconciliation of recurring Level 3 measurements about purchases,sales, issuances and settlements on a gross basis. In addition to these newdisclosure requirements, this update clarifies certain existing disclosurerequirements. For example, this update clarifies that reporting entities are requiredto provide fair value measurement disclosures for each class of assets andliabilities rather than each major category of assets and liabilities. Thisupdate also clarifies the requirement for entities to disclose informationabout both the valuation techniques and inputs used in estimating Level 2 andLevel 3 fair value measurements. This update is effective for companies withinterim and annual reporting periods after December 15, 2009, except forthe requirement to provide the Level 3 activity of purchases, sales, issuances,and settlements on a gross basis, which will become effective for interim andannual reporting periods beginning after December 15, 2010. The Companyadopted the updated guidance in the first quarter of 2010 and the adoption didnot have an impact on the Company’s financial position, results of operations,or cash flows.

 

In June 2009, the FASB issued new authoritativeguidance that amends certain guidance for determining whether an entity is avariable interest entity (VIE). The guidance requires an enterprise to performan analysis to determine whether the Company’s variable interests give it acontrolling financial interest in a VIE. A company would be required to assesswhether it has an implicit financial responsibility to ensure that a VIEoperates as designed when determining whether it has the power to direct theactivities of the VIE that most significantly impact the entity’s economicperformance. In addition, this guidance amends earlier guidance requiringongoing reassessments of whether an enterprise is the primary beneficiary of aVIE. The guidance is effective for the Company for fiscal year 2010. Theadoption of the provisions of this guidance, which was effective January 1,2010, did not have a material impact on the consolidated financial statements.

 

**3.  USE OF ESTIMATES**

 

The preparation offinancial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimatesand assumptions that affect the reported amounts of assets and liabilities anddisclosure of contingent assets and liabilities at the dates of the financialstatements and the reported amounts of revenues and expenses during thereporting periods. The most significant estimates relate to allowance fordoubtful accounts, useful lives of the Company’s fixed and finite-livedintangible assets, allocation of purchase price to assets acquired andliabilities assumed in purchase business combinations, fair value ofindefinite-lived intangible assets, goodwill and income taxes. Actual resultscould differ significantly from those estimates.

 

**4.  ACQUISTION- ALLTEL ASSETS**

 

On April 26, 2010,the Company completed its previously-announced acquisition of wireless assetsfrom Cellco Partnership d/b/a Verizon Wireless (“Verizon”) pursuant to thePurchase Agreement, dated June 9, 2009, by and between the Company andVerizon (the “Alltel Acquisition”).  Pursuant to the Purchase Agreement,Verizon contributed certain licenses, network assets, tower and other leasesand other assets and certain related liabilities to a wholly-owned subsidiarylimited liability company, whose membership interests were acquired by AlliedWireless Communications Corporation (“AWCC”), the Company’s wholly-ownedsubsidiary.  In connection with the Alltel Acquisition, the Company andVerizon entered into roaming and transition services arrangements, and theCompany obtained the rights to use the Alltel brand and related service marksfor a twenty-eight year total term in connection with the continuing operationof the acquired assets.

 

Atlantic Tele-Network, Inc.has completed its preliminary assessment of the fair value of assets acquiredand liabilities assumed of Alltel.  The table below represents apreliminary assessment of the total acquisition cost to the tangible andintangible assets and liabilities of Alltel based on management’s preliminaryestimate of their acquisition date fair values:

 
| Total  cash consideration                                    |   | $       | 222,726 |   |
|--------------------------------------------------------------|--------|---------|---------|--------|
|                                                         |   |    |    |
| Preliminary purchase price allocation:                       |   |    |    |
| Current assets                                               |   | 48,275  |    |
| Property, plant and equipment                                |   | 162,680 |    |
| Identifiable intangible assets                               |   | 139,700 |    |
| Other long term assets                                       |   | 12,000  |    |
| Current liabilities                                          |   | (35,640 | )       |
| Other long term liabilities                                  |   | (33,771 | )       |
| Deferred tax liabilities                                     |   | (21,176 | )       |
| Non-controlling interests                                    |   | (17,042 | )       |
| Net assets acquired                                          |   | 255,026 |    |
|                                                         |   |    |    |
| Gain on bargain purchase, net of  estimated taxes of $21,176 |   | $       | 32,300  |   |

 

It is currentlyimpracticable for the Company to report the pro forma information due to therecent closing of the acquisition.The required information will be disclosed in a future filing.

 

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The Company funded thepurchase price with cash-on-hand and borrowings under its existing creditfacility.  The Company drew down a $150 million term loan under theAmended and Restated Credit Agreement, dated as of January 20, 2010, byand among the Company, certain of the Company’s subsidiaries, as Guarantors,CoBank, ACB, as Administrative Agent, Arranger, Issuer Lender and Lender, andthe other Lenders named therein.  Inaddition, the Company borrowed $40 million under its previously undrawn$75 million revolving credit facility.

 

**5.  FAIR VALUE MEASUREMENTS**

 

In accordance withthe provisions of fair value accounting, a fair value measurement assumes thatthe transaction to sell an asset or transfer a liability occurs in theprincipal market for the asset or liability or, in the absence of a principalmarket, the most advantageous market for the asset or liability and definesfair value based upon an exit price model.

 

The fair value measurementguidance establishes a fair value hierarchy which requires an entity tomaximize the use of observable inputs and minimize the use of unobservableinputs when measuring fair value.  Theguidance describes three levels of inputs that may be used to measure fairvalue:

 

*Level 1*- Quoted prices in active markets foridentical assets or liabilities as of the reporting date.  Active markets are those in whichtransactions for the the asset or liability occur in sufficient frequency andvolume to provide pricing information on an ongoing basis.  Level 1 assets and liabilities include debtand equity securities and derivative contrats that are traded in an activeexchange market.

 

*Level 2*- Observable inputs other than Level 1prices, such as quoted prices for similar assets or liabilities; quoted pricesin markets that are not active; or other inputs that are observable or can becorroborated by the observable market data for substantially the full term ofthe assets or liabilities.  Level 2assets and liabilities include debt securities with quoted prices that aretraded less frequently than exchange-traded instruments and derivativecontracts whose value is determined using a pricing model with inputs that areobservable in the market or can be derived principally from or corroborated byobservable market data.  This categorygenerally includes certain U.S. Government and Agency mortgage-backed debtsecurities, corporate debt securities, and non-exchange traded derivativecontracts.

 

*Level 3*- Unobservable inputs that are supportedby little or no market activity and that are significant to the fair value ofthe assets or liabilities.  Level 3assets and liabilities include financial instruments whose value is determinedusing pricing models, discounted cash flow methodologies, or similartechniques, as well as instruments for which the determination of fair valuerequires significant management judgment or estimation.

 

Assets andliabilities of the Company measured at fair value on a recurring basis as of December 31,2009 are summarized as follows:

 
| **December 31, 2009**                   | ** ** |
|----------------------------------------------|------------|
| **Description**                              | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Total** | ** ** |
| Certificates  of deposit                     |       | $ |  — |   | $ |  8,362 |   | $ |  8,362 |   |
| Money  market funds                          |       | 13,091 |   | — |   | 13,091 |   |
| **Total assets measured at fair value**      |       | $ |  13,091 |   | $ |  8,362 |   | $ |  21,453 |   |
|                                         |       |   |   |   |   |   |   |
| Interest  rate swap (Note 7)                 |       | $ |  — |   | $ |  5,096 |   | $ |  5,096 |   |
| **Total liabilities measured at fair value** |       | $ |  — |   | $ |  5,096 |   | $ |  5,096 |   |

 

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Assets andliabilities of the Company measured at fair value on a recurring basis as of March 31,2010 are summarized as follows:

 
| **March 31, 2010**                      | ** ** |
|----------------------------------------------|------------|
| **Description**                              | ** ** | **Quoted Prices in  Active Markets  (Level 1)** | ** ** | **Significant Other  Observable Inputs  (Level 2)** | ** ** | **Total** | ** ** |
| Certificates  of deposit                     |       | $ | — |   | $ | 3,360 |   | $ | 3,360 |   |
| Money  market funds                          |       | 8,906 |   | — |   | 8,906 |   |
| **Total assets measured at fair value**      |       | $ | 8,906 |   | $ | 3,360 |   | $ | 12,266 |   |
|                                         |       |   |   |   |   |   |   |
| Interest  rate swap (Note 7)                 |       | $ | — |   | $ | 5,915 |   | $ | 5,915 |   |
| **Total liabilities measured at fair value** |       | $ | — |   | $ | 5,915 |   | $ | 5,915 |   |

 

*MoneyMarket Funds*

 

This asset classconsisted of a money market portfolio that is comprised of securitiesclassified within Level 1 of the fair value hierarchy because they are valuedusing quoted market prices in active markets.

 

*Certificatesof Deposit*

 

Certificatesof deposit are classified within Level 2 of the fair value hierarchy becausethey are valued using quoted prices for similar assets.

 

*InterestRate Swap*

 

The Company’s objectivesin using interest rate derivatives are to add stability to interest expense andto manage its exposure to interest rate movements. The interest rate swap isvalued using broker quotations.  As such,the interest rate swap is classified within Level 2.

 

**6.  LONG-TERM DEBT**

 

Long-term debt comprises the following (in thousands):

 
| ** **                           | ** ** | **December 31,  2009** | ** ** | **March 31,  2010** | ** ** |
|--------------------------------------|------------|-----------------------------|------------|--------------------------|------------|
| Note  payable- $75 million term loan |       | $                           | 73,875     |                     | $          | 72,951 |   |
| Less:  current portion               |       | (3,694                      | )          | (3,694                   | )          |
| Total  long-term debt                |       | 70,181                      |       | 69,257                   |       |
| Less:  debt discount                 |       | (630                        | )          | (595                     | )          |
| Net  carrying amount                 |       | $                           | 69,551     |                     | $          | 68,662 |   |

 

***2008 Loan Facility***

 

On September 10,2008, the Company, as borrower, entered into a credit agreement with CoBank,ACB and other lenders as referenced within the credit agreement (the “2008CoBank Credit Agreement”). The 2008 CoBank Credit Agreement provided a$75 million term loan (the “2008 Term Loan”) as well as a $75 millionrevolving credit facility (the “2008 Revolver Facility”, together with the 2008Term Loan, the “2008 Credit Facility”). The 2008 Revolver Facility included a$5 million letter of credit facility

 

The 2008 Term Loanrequired quarterly repayments of principal of $0.2 million through June 30,2013 and quarterly repayments of principal of $1.4 million from September 30,2013 to June 30, 2015. The remaining outstanding principal balance was tobe repaid on September 10, 2015 when the 2008 Term Loan was to mature.

 

All borrowings under the2008 Credit Facility were bearing interest at a rate, selected by the Companyfrom one of the options as defined within the agreement, plus a margin. Suchinterest rate options included i) a base rate, defined as the greater ofthe prime rate or the federal funds rate plus 0.5%, or ii) a LIBOR rate.Margins for base rate borrowings ranged from 0% to 0.5%, depending upon theCompany’s leverage ratio while margins for LIBOR borrowings ranged from 1.25%to 2% also depending upon the Company’s leverage ratio.

 

The 2008 CoBank CreditAgreement contained certain affirmative and negative covenants of the Companyand its subsidiaries. Among other things, these covenants restricted theCompany’s ability to incur additional debt or to incur liens on its property.The 2008 Credit Agreement also required the Company to maintain certainfinancial ratios including a net leverage ratio of less than or equal to 3.0 to1, an interest coverage ratio of greater than or equal to 3.5 to 1 and anequity to assets ratio of greater than or equal to 0.4 to 1.

 

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***2010 Loan Facility***

 

On January 20, 2010,the Company amended and restated its 2008 Credit Facility with CoBank asAdministrative Agent. (the “2010 CoBank Credit Agreement”). The 2010 CoBankCredit Agreement provides for a $298.9 million credit facility, consistingof a $73.9 million term loan (the “2010 Term Loan A”), a$150.0 million term loan (the “2010 Term Loan B”) and a $75.0 millionrevolver loan (the “2010 Revolver Loan,” and together with the 2010 Term Loan Aand 2010 Term Loan B, the “2010 Credit Facility”). The 2010 Credit Facilityalso provides for one or more additional term loans up to an aggregate$50.0 million, subject to lender and administrative agent approval.

 

Upon the closing of the2010 Credit Facility, $73.9 million was outstanding under the 2010 TermLoan A, an amount equal to the outstanding principal amount under the 2008 TermLoan.  As of March 31, 2010, noamounts were outstanding under the 2010 Term Loan B or the 2010 RevolverLoan.  As discussed in Note 4, theCompany partially funded the purchase price of the Alltel Acquisition with the$150 million 2010 Term Loan B and borrowed $40 million under the 2010 RevolverLoan.

 

The 2010 Term Loan A andthe 2010 Term Loan B each mature on September 30, 2014, unless acceleratedpursuant to an event of default, as described below. The 2010 Revolver Loanmatures on September 10, 2014, unless accelerated pursuant to an event ofdefault, as described below. Amounts borrowed under the 2010 Term Loan A, 2010Term Loan B and the 2010 Revolver Loan bear interest at a rate equal to, at theCompany’s option, either (i) the London Interbank Offered Rate (LIBOR)plus an applicable margin ranging between 3.50% to 4.75% or (ii) a baserate plus an applicable margin ranging from 2.50% to 3.75%. The Company is notrequired to apply a minimum LIBOR percentage for any loans bearing interest atthe LIBOR rate. The base rate is equal to the higher of either (i) 1.50%plus the higher of (x) the one-week LIBOR and (y) the one-month LIBORand (ii) the prime rate (as defined in the credit agreement). Theapplicable margin is determined based on the ratio of the Company’sindebtedness (as defined in the credit agreement) to its EBITDA (as defined inthe credit agreement). Borrowings as of March 31, 2010, including theinterest rate swap agreement as described in Note 7, were bearing aweighted average interest rate of 7.88%.

 

All amounts outstandingunder the 2010 Revolver Loan will be due and payable upon the earlier of thematurity date or the acceleration of the loan upon an event of default. Amountsoutstanding under the 2010 Term Loan A and the 2010 Term Loan B became due andpayable commencing on March 31, 2010 and June 30, 2010, respectivelyin quarterly payments equal to 1.25% of the initial principal amountoutstanding under each loan, increasing to 2.50% of the initial principalamount outstanding commencing on March 31, 2012. Remaining balances willbe due and payable upon maturity, unless the loans are accelerated upon anevent of default.

 

Certain subsidiaries,including AWCC, Commnet, Sovernet and Choice are guarantors of our obligationsunder the 2010 CoBank Credit Agreement. Further, our obligations are secured by(i) a first priority, perfected lien on substantially all of our propertyand assets and the guarantor subsidiaries, including its principal wholly-owneddomestic operating subsidiaries and (ii) a pledge of 100% of the Company’sequity interests in certain domestic subsidiaries and up to 65% of the equityinterests outstanding of certain foreign subsidiaries, in each case, includingthe Company’s principal operating subsidiaries.

 

The 2010 CoBank CreditAgreement contains customary representations, warranties and covenants,including covenants by the Company limiting additional indebtedness, liens,guaranties, mergers and consolidations, substantial asset sales, investmentsand loans, sale and leasebacks, transactions with affiliates and fundamentalchanges. In addition, the 2010 CoBank Credit Agreement contains financialcovenants by the Company that (i) impose a maximum ratio of indebtedness(as defined in the credit agreement) to EBITDA (as defined in the creditagreement), (ii) require a minimum ratio of EBITDA to cash interestexpense, (iii) require a minimum ratio of equity to consolidated assetsand (iv) require a minimum ratio of EBITDA to fixed charges (as defined inthe credit agreement). As of March 31, 2010, the Company was in compliancewith all of the financial covenants of the 2010 CoBank Credit Agreement.

 

The 2010 CoBank Agreementprovides for events of default customary for credit facilities of this type,including but not limited to non-payment, defaults on other debt,misrepresentation, breach of covenants, representations and warranties,insolvency and bankruptcy. After the occurrence of an event of default and forso long as it continues, the administrative agent or the requisite lenders (asdefined in the credit agreement) may increase the interest rate then in effecton all outstanding obligations by 2.0%. Upon an event of default relating toinsolvency, bankruptcy or receivership, the amounts outstanding under the 2010 CreditFacility will become immediately due and payable and the lender commitmentswill be automatically terminated. Upon the occurrence and continuation of anyother event of default, the administrative agent and/or the requisite lenders(as defined in the credit agreement) may accelerate payment of all obligationsand terminate the lenders’ commitments under the 2010 CoBank Agreement.

 

**7. DERIVATIVE INSTRUMENTS AND HEDGINGACTIVITIES**

 

As required by the FASB’sauthoritative guidance on accounting for derivative instruments and hedgingactivities, the Company records all derivatives on the balance sheet at fairvalue. The accounting for changes in the fair value of derivatives depends

 

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on the intended use of the derivative, whether theCompany has elected to designate a derivative in a hedging relationship andapply hedge accounting and whether the hedging relationship has satisfied thecriteria necessary to apply hedge accounting. Derivatives designated andqualifying as a hedge of the exposure to changes in the fair value of an asset,liability, or firm commitment attributable to a particular risk, such as interestrate risk, are considered fair value hedges. Derivatives designated andqualifying as a hedge of the exposure to variability in expected future cashflows, or other types of forecasted transactions, are considered cash flowhedges. Hedge accounting generally provides for the matching of the timing ofgain or loss recognition on the hedging instrument with the recognition of thechanges in the fair value of the hedged asset or liability that areattributable to the hedged risk in a fair value hedge or the earnings effect ofthe hedged forecasted transactions in a cash flow hedge. The Company may enterinto derivative contracts that are intended to economically hedge certain ofits risk, even though hedge accounting does not apply or the Company elects notto apply hedge accounting.

 

***Risk ManagementObjective of Using Derivatives***

 

The Company is exposed tocertain risk arising from both its business operations and economic conditions.The Company principally manages its exposures to a wide variety of business andoperational risks through management of its core business activities. TheCompany manages economic risks related to interest rates primarily by managingthe amount, sources, and duration of its debt funding and the use of derivativefinancial instruments. Specifically, the Company entered into derivativefinancial instruments to manage exposures that arise from business activitiesthat result in the payment of future known and uncertain cash amounts, thevalue of which are determined by interest rates. The Company’s derivativefinancial instruments are used to manage differences in the amount, timing, andduration of its known or expected cash payments principally related to theCompany’s borrowings.

 

***Cash Flow Hedges ofInterest Rate Risk***

 

The Company’s objectivesin using interest rate derivatives are to add stability to interest expense andto manage its exposure to interest rate movements. To accomplish thisobjective, the Company primarily uses an interest rate swap as part of itsinterest rate risk management strategy. Interest rate swaps designated as cashflow hedges involve the receipt of variable-rate amounts from a counterparty inexchange for the Company making fixed-rate payments over the life of theagreements without exchange of the underlying notional amount.

 

The effective portion ofchanges in the fair value of interest rate swaps designated and that qualify ascash flow hedges is recorded in Accumulated Other Comprehensive Income and issubsequently reclassified into earnings in the period that the hedgedforecasted transaction affects earnings. The Company uses a derivative to hedge the variable cash flowsassociated with existing variable-rate debt. The ineffective portion of thechange in fair value of the derivative is recognized directly in earnings. Nohedge ineffectiveness was recognized during either the three months ended March 31,2009 or 2010.

 

Amounts reported inaccumulated other comprehensive income related to the interest rate swap willbe reclassified to interest expense as interest payments are made on theCompany’s variable-rate debt. Through March 31, 2011, the Companyestimates that an additional $2.7 million will be reclassified as anincrease to interest expense due to the interest rate swap since the hedgeinterest rate exceeds the variable interest rate on the debt.

 

As of December 31,2009 and March 31, 2010, the Company’s sole derivative instrument was aninterest rate swap with a notional amount of $68 million that wasdesignated as a cash flow hedge of interest rate risk.

 

The table below presentsthe fair value of the Company’s derivative financial instrument as well as itsclassification on the consolidated balance sheet as of December 31, 2009and March 31, 2010 (in thousands):

 
| ** **                                           | ** ** | **Liability Derivatives**  | ** ** |
|------------------------------------------------------|------------|----------------------------|------------|
| ** **                                           | ** ** | ** **                 | ** ** | **Fair Value as of** | ** ** |
| ** **                                           | ** ** | **Balance Sheet Location** | ** ** | **December 31,  2009** | ** ** | **March 31,  2010** | ** ** |
| Derivatives designated as hedging instruments:       |       |                       |       |   |   |   |   |
| Interest Rate Swap                                   |       | Other  liabilities         |       | $ | 5,096 |   | $ | 5,915 |   |
| Total derivatives designated as hedging  instruments |       |                       |       | $ | 5,096 |   | $ | 5,915 |   |

 

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The table below presentsthe effect of the Company’s derivative financial instrument on the income statementsfor the three months ended March 31, 2009 and 2010 (in thousands):

 
| **Three Months Ended March 31,** | ** ** | **Derivative in Cash Flow  Hedging Relationships** | ** ** | **Amount of Gain or  (Loss) Recognized  in OCI on Derivative  (Effective Portion)** | ** ** | **Location of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** **       | **Amount of Gain or  (Loss) Reclassified  from Accumulated  OCI into Income  (Effective Portion)** | ** ** |
|---------------------------------------|------------|----------------------------------------------------|------------|-------------------------------------------------------------------------------------|------------|------------------------------------------------------------------------------------------------------|------------------|----------------------------------------------------------------------------------------------------|------------|
| 2009                                  |       | Interest Rate Swap                                 |       | $                                                                                   | 21         |                                                                                                 | Interest expense |                                                                                               | $          | 659 |   |
| 2010                                  |       | Interest Rate Swap                                 |       | (820                                                                                | )          | Interest expense                                                                                     |             | 713                                                                                                |       |
|                                       |            |                                                    |            |                                                                                     |            |                                                                                                      |                  |                                                                                                    |            |  |  |

 

***Credit-risk-relatedContingent Features***

 

The Company has anagreement with its derivative counterparty that contains a provision where ifthe Company defaults on any of its indebtedness, including default whererepayment of the indebtedness has not been accelerated by the lender, then theCompany could also be declared in default on its derivative obligations.

 

As of March 31,2010, the fair value of the interest rate swap liability position, related tothis agreement was $5.9 million. As of March 31, 2010, the Companyhas not posted any collateral related to this agreement. If the Company hadbreached any of these provisions at March 31, 2010, it would have beenrequired to settle its obligation under the agreement at its termination valueof $5.9 million.

 

**8. RECONCILIATION OF TOTAL EQUITY**

 

Total equity was asfollows (in thousands):

 
| ** **                                                                            | ** ** | **Three Months Ended March 31,** | ** ** |
|---------------------------------------------------------------------------------------|------------|------------------------------------------------------|------------|
| ** **                                                                            | ** ** | **2009**                                             | ** ** | **2010** | ** ** |
| ** **                                                                            | ** ** | **Atlantic Tele-  Network, Inc.**          | ** ** | **Non-Controlling  Interests** | ** ** | **Total Equity** | ** ** | **Atlantic Tele-  Network, Inc.** | ** ** | **Non-Controlling  Interests** | ** ** | **Total  Equity** | ** ** |
| Equity,  beginning of period                                                          |       | $                                                    | 228,873    |   | $ | 32,787 |   | $ | 261,660 |   | $ | 255,746 |   | $ | 26,687 |   | $ | 282,433 |   |
| Stock  based compensation                                                             |       | 300                                                  |       | — |   | 300 |   | 355 |   | — |   | 355 |   |
| Comprehensive  income:                                                                |       |                                                 |       |   |   |   |   |   |   |   |   |   |   |
| Net  income                                                                           |       | 8,802                                                |       | 228 |   | 9,030 |   | 4,006 |   | (148 | ) | 3,858 |   |
| Other comprehensive  income(loss)- Gain(loss) on interest rate swap (net of tax) |       | 401                                                  |       | — |   | 401 |   | (492 | ) | — |   | (492 | ) |
| Total  comprehensive income                                                           |       | 238,376                                              |       | 33,015 |   | 271,391 |   | 3,869 |   | (148 | ) | 3,721 |   |
| Dividends  on common stock                                                            |       | (2,741                                               | )          | — |   | (2,741 | ) | — |   | — |   | — |   |
| Distributions  to non-controlling interests                                           |       | —                                               |       | (1,634 | ) | (1,634 | ) | — |   | (31 | ) | (31 | ) |
| Investments  made by minority shareholders                                            |       | —                                               |       | — |   | — |   | — |   | 125 |   | 125 |   |
| Purchase  of common shares                                                            |       | (23                                                  | )          | — |   | (23 | ) | — |   | — |   | — |   |
| Equity,  end of period                                                                |       | $                                                    | 235,612    |   | $ | 31,381 |   | $ | 266,993 |   | $ | 259,615 |   | $ | 26,633 |   | $ | 286,248 |   |

 

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**9.  NET INCOME PER SHARE**

 

For the three monthsended March 31, 2009 and 2010, outstanding stock options were the onlypotentially dilutive securities.

 

The reconciliation frombasic to diluted weighted average common shares outstanding is as follows (inthousands):

 
| ** **                                          | ** ** | **Three Months Ended  March 31,** | ** ** |
|-----------------------------------------------------|------------|--------------------------------------------------|------------|
| ** **                                          | ** ** | **2009**                                         | ** ** | **2010** | ** ** |
| Basic  weighted average common shares outstanding   |       | 15,229                                           |       | 15,260 |   |
| Stock  options                                      |       | 21                                               |       | 187 |   |
| Diluted  weighted average common shares outstanding |       | 15,250                                           |       | 15,447 |   |

 

The above calculationsfor the three months ended March 31, 2009 and 2010 do not include 334,000and 60,000 shares, respectively, related to certain stock options because theeffects of such were anti-dilutive.

 

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**10.SEGMENT REPORTING**

 

The Company has fivereportable segments for separate disclosure in accordance with the FASB’sauthoritative guidance on disclosures about segments of an enterprise. Thosefive segments are: i) Integrated Telephony-International, which generatesall of its revenues in Guyana and has all of its assets located in Guyana,ii) Rural Wireless, which generates all of its revenues in the UnitedStates and has all of its assets located in the United States, iii) IslandWireless, which generates its revenues in and has its assets in Bermuda andTurks and Caicos, iv) Integrated Telephony-Domestic, which generates allof its revenues and has all of its assets located in the United States andv) Wireless Data, which generates all of its revenues in and has all ofits assets located in the U.S Virgin Islands. The operating segments aremanaged separately because each offers different services and serves differentmarkets.

 

The following tablesprovide information for each operating segment (in thousands):

 
| ** **                        | ** ** | **For the Three Months Ended March 31, 2009** | ** ** |
|-----------------------------------|------------|----------------------------------------------------|------------|
| ** **                        | ** ** | **Integrated  Telephony-  International**          | ** ** | **Rural  Wireless** | ** ** | **Island  Wireless** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Data** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                          |       | $                                                  | 22,734     |   | $ | 21,639 |   | $ | 5,167 |   | $ | 4,610 |   | $ | 1,816 | (1) | $ | — |   | $ | 55,966 |   |
| Depreciation and amortization     |       | 4,183                                              |       | 3,235 |   | 711 |   | 719 |   | 278 |   | 74 |   | 9,200 |   |
| Non-cash stock-based compensation |       | —                                             |       | — |   | — |   | 32 |   | — |   | 268 |   | 300 |   |
| Operating income (loss)           |       | 9,318                                              |       | 10,252 |   | 210 |   | (494 | ) | (564 | ) | (1,945 | ) | 16,777 |   |
|                              |       |                                               |       |   |   |   |   |   |   |   |   |   |   |   |   |
| ** **                        | ** ** | **For the Three Months Ended March 31, 2010** | ** ** |
| ** **                        | ** ** | **Integrated  Telephony-  International**          | ** ** | **Rural  Wireless** | ** ** | **Island  Wireless** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Data** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| Revenues                          |       | $                                                  | 21,159     |   | $ | 22,936 |   | $ | 4,621 |   | $ | 4,926 |   | $ | 1,043 |   | $ | — |   | $ | 54,685 |   |
| Depreciation and amortization     |       | 4,283                                              |       | 4,070 |   | 745 |   | 700 |   | 230 |   | 41 |   | 10,069 |   |
| Non-cash stock-based compensation |       | —                                             |       | — |   | — |   | 10 |   | — |   | 345 |   | 355 |   |
| Operating income (loss)           |       | 7,456                                              |       | 9,950 |   | (445 | ) | (115 | ) | (554 | ) | (8,870 | ) | 7,422 |   |

 

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(1)          Includes $0.8 million of wireless television servicesfor the three months ended March 31, 2009. This service was discontinuedon May 31, 2009.

 

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| ** **                  | ** ** | **Segment Assets**                        | ** ** |
|-----------------------------|------------|-------------------------------------------|------------|
| ** **                  | ** ** | **Integrated  Telephony-  International** | ** ** | **Rural  Wireless** | ** ** | **Island  Wireless** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Data** | ** ** | **Corporate** | ** ** | **Consolidated** | ** ** |
| **December 31, 2009:** |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net  fixed assets           |       | $                                         | 117,931    |   | $ | 68,560 |   | $ | 16,584 |   | $ | 8,829 |   | $ | 4,165 |   | $ | 946 |   | $ | 217,015 |   |
| Goodwill                    |       | —                                    |       | 32,148 |   | 722 |   | 7,491 |   | — |   | — |   | 40,361 |   |
| Total  assets               |       | 152,936                                   |       | 147,639 |   | 43,135 |   | 24,898 |   | 6,599 |   | 71,347 |   | 446,554 |   |
| **March 31, 2010:**    |       |                                      |       |   |   |   |   |   |   |   |   |   |   |   |   |
| Net  fixed assets           |       | $                                         | 120,083    |   | $ | 72,988 |   | $ | 16,886 |   | $ | 8,588 |   | $ | 4,194 |   | $ | 1,565 |   | $ | 224,304 |   |
| Goodwill                    |       | —                                    |       | 32,148 |   | 722 |   | 7,491 |   | — |   | — |   | 40,361 |   |
| Total  assets               |       | 157,153                                   |       | 148,420 |   | 42,198 |   | 24,165 |   | 5,179 |   | 66,082 |   | 443,197 |   |

 
| ** **                                       | ** ** | **Capital  Expenditures**                 | ** ** |
|--------------------------------------------------|------------|-------------------------------------------|------------|
| **Three Months Ended  March 31,** | ** ** | **Integrated  Telephony-  International** | ** ** | **Rural  Wireless** | ** ** | **Island  Wireless** | ** ** | **Integrated  Telephony-  Domestic** | ** ** | **Wireless  Data** | ** ** | **Reconciling  Items** | ** ** | **Consolidated** | ** ** |
| 2009                                             |       | $                                         | 3,490      |   | $ | 5,720 |   | $ | 530 |   | $ | 240 |   | $ | — |   | $ | — |   | $ | 9,980 |   |
| 2010                                             |       | 5,970                                     |       | 4,435 |   | 1,047 |   | 335 |   | 4,440 |   | 662 |   | 16,889 |   |
|                                                  |            |                                           |            |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

**11.  COMMITMENTS AND CONTINGENCIES**

 

**Regulatory and Litigation Matters**

 

The Company and its subsidiaries are subject to certain regulatory andlegal proceedings and other claims arising in the ordinary course of business,some of which involve claims for damages and taxes that are substantial inamount. The Company believes that, except for the items discussed below andthose discussed in our Annual Report on Form 10-K for the year ended December 31,2009, for which the Company is currently unable to predict the final outcome,the disposition of proceedings currently pending will not have a materialadverse effect on the Company’s financial position or results of operations.

 

***Regulatory***

 

The Company’s Guyana subsidiary, GT&T, is subject to regulation inGuyana under the provisions of its license and under the Guyana PublicUtilities Commission Act of 1999 and the Guyana Telecommunications Act of 1990.GT&T also has certain significant rights and obligations under the agreementpursuant to which the Company acquired its interest in GT&T in 1990 andbecause of the large volume of traffic that GT&T has with the UnitedStates, GT&T can be significantly affected by orders of U.S. regulatoryagencies.

 

Since 2001, the Government of Guyana has stated its intention tointroduce additional competition into Guyana’s telecommunications sector.During 2008, at the request of the Government, GT&T met with high-rankingmembers of the Government to discuss potential modifications of GT&T’s exclusivityrights and the introduction of competition for international voice and dataservices. ATN and GT&T believe that such competition is precluded byGT&T’s exclusive license to provide domestic fixed and international voiceand data services in Guyana, which has a stated expiration in December 2010.Each of these licenses is renewable at GT&T’s option, for an additionalterm of twenty years. In November of 2009, GT&T notified theGovernment that it is exercising its option to renew its exclusive and non-exclusivelicenses for a further period of twenty years. In exercising our option torenew our licenses, we reiterated to the Government that we would be willing tovoluntarily relinquish the exclusivity aspect of our licenses, but only as partof an overall settlement agreement with the Government.

 

ATN and GT&T believe that any early termination of our exclusivitywould require our consent and appropriate compensation to GT&T, as well asthe satisfactory resolution of certain long-standing claims between us and theGovernment relating to certain tax and other matters. In addition, certainmodifications to the legal and regulatory regime governing thetelecommunications market sector in Guyana will be necessary. The Government ofGuyana has acknowledged that a transition to full competition will require asignificant rebalancing of local and long distance rates for domestic andinternational services provided by GT&T. During 2008, GT&T helddiscussions with the Government to develop an appropriate methodology andprocess to implement rate rebalancing during and after a transition tocompetition. We have been open about our willingness to consider relingquishingour international exclusivity rights in 2010 as part of an overall settlementand agreement.

 

In October 2008, GT&T was informally notified that theGovernment has retained the services of a US-based law firm and a consultant todevelop the legislative and regulatory reforms necessary to introducetelecommunications competition in Guyana. GT&T 

 

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hasmet informally with those persons to discuss the process and possible timing ofany legislation or regulatory initiative. GT&T has been informed that draftlegislation liberalizing the telecommunications sector in Guyana may beavailable during 2010. At this time, ATN and GT&T do not know whether orhow any draft legislation will address GT&T’s exclusive license, and if so,whether it would be pursuant to an agreement between GT&T and theGovernment. Other than entering into such an agreement on mutually acceptableterms, ATN and GT&T would seek to enforce GT&T’s rights by law andcontract to be the exclusive provider of domestic fixed and international voiceand data services in Guyana and would pursue any other legitimate avenues ofrecourse available to us. Although ATN and GT&T believe that they would beentitled to damages for any involuntary termination of that exclusive license,ATN and GT&T cannot guarantee that we would prevail in any court orarbitration proceeding or that our actions would effectively halt anyunilateral action by the Government.

 

***Litigation***

 

Upon the acquisition of GT&T in 1990, ATN entered into an agreementwith the government of Guyana to significantly expand GT&T’s existingfacilities and telecommunications operations and to improve service within athree-year period pursuant to an expansion and service improvement plan (the “Plan”).  Since 1995, the PUC has had a pendingproceeding questioning whether or not GT&T completed the Plan within therequired timeframe.  A ruling againstGT&T could have a material adverse effect to the Company although GT&Tbelieves that its obligations have been fulfilled and it has continued toaggressively develop the telecommunications infrastructure in all areasincluding landline, wireless and data.

 

GT&T is involved in several legal claims regarding its tax filingswith the Guyana Inland Revenue dating back to 1991 regarding the deductibilityof advisory fees paid to ATN by GT&T as well as other tax assessments. Noaction has been taken by the Guyana Inland Revenue since 1997.  Should GT&T be held liable for any of thetax liabilities, totaling $23.5 million, the Company believes that thegovernment of Guyana would be obligated to reimburse GT&T for any amountsthat would reduce GT&T’s return on investment to less than 15% per annumfor the relevant periods.

 

On May 8, 2009, Digicel filed a lawsuit in Guyana challenging thelegality of GT&T’s exclusive license under Guyana’s constitution. Digicelinitially filed this lawsuit against the Attorney General of Guyana in the HighCourt. On May 13, 2009, GT&T petitioned to intervene in the suit inorder to oppose Digicel’s claims and that petition was granted on May 18,2009. GT&T filed its answer to the charge on June 22, 2009 and thecase is pending.

 

We believe that any legal challenge to GT&T’s exclusive licensegranted in 1990, including other lawsuits filed in 2000 by Inet Communications, Inc.and in 2002 by an individual are without merit and we will vigorously defendagainst such a legal challenge.

 

For all of the above regulatory, litigation, or related matters, theCompany believes some adverse outcome is probable and has accordingly accrued$5.0 million as of March 31, 2010.

 

**12.  RELATED PARTY TRANSACTION**

 

***Choice Television Assets***

 

In December 2007,the Company wrote down its investment in the television assets of Choice andbegan exploring strategic alternatives for their use or disposition. Choicediscontinued its wireless television service in May 2009. In November 2009,upon approval by the Audit Committee of the Board of Directors, the Companyentered into an agreement with Cornelius B. Prior, Jr., the Chairman andthe father of the Company’s Chief Executive Officer, to sell to Mr. Priorsuch assets of Choice for $400,000 in cash. The assets, which are located inthe US Virgin Islands, consisted primarily of television transmissionfacilities, subscriber equipment and satellite receiver equipment. The sale to Mr. Priorwas completed in December 2009.

 

**13.  SUBSEQUENT EVENTS**

 

Other than thetransaction noted in Note 4, there were no subsequent events required to berecognized or disclosed in the financial statements.

 

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**ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OFFINANCIAL CONDITION AND RESULTS OF****OPERATIONS**

 

**Overview**

 

We provide wireless and wireline telecommunication services in NorthAmerica and the Caribbean through the following operating subsidiaries:

 

·Allied Wireless Communications Corporation (“AWCC”),a provider of wireless voice and data services to retail and business customersin six states in the rural U.S., operating under the “Alltel” brand.  AWCC, a wholly owned subsidiary of theCompany, began service following the Company’s acquisition of former Alltelassets from Verizon Wireless in April 2010.  The Company will consolidate AWCC’s financialresults beginning in the second quarter of 2010.

 

· Commnet Wireless, LLC (“Commnet”), an ownerand operator of wholesale wireless networks in rural areas of the UnitedStates. Commnet provideswireless voice and data communications roaming services principally tonational, regional and local wireless carriers. Commnet generated approximately39% and 42% of our consolidated revenues for the three months ended March 31,2009 and 2010, respectively. We acquired a 95% equity interest in Commnet in2005 and acquired the remaining 5% equity interest in 2007.

 

· Guyana Telephone & TelegraphCompany, Ltd. (“GT&T”), the exclusive provider of local exchange andinternational long distance telecommunications services in the Republic ofGuyana. GT&T is also one of two service providers in Guyana’s competitivewireless telecommunications market. We have owned 80% of the stock of GT&Tsince January 1991.. GT&T generated approximately 41% and 39% of ourconsolidated revenues for the three months ended March 31, 2009 and 2010,respectively.

 

·Bermuda Digital Communications, Ltd. (“BDC”), aleading wireless voice and data communications service provider in Bermuda,doing business under the name “Cellular One”. We acquired an equity interestin, and signed a management contract with, BDC in 1998. During 2008, BDC completed a share repurchase of its common stock. Wedid not tender any shares for repurchase, and, as a result of the transaction,we increased our holdings from approximately 43% to approximately 58% of BDC’soutstanding common stock.  In 2008, BDCbegan providing wireless services in Turks and Caicos through IslandcomTelecommunications, Ltd.

 

·Sovernet, Inc. (“Sovernet”), afacilities-based integrated voice, broadband data communications and dial-upservice provider in New England and New York State. Sovernet’s retailtelecommunications service is delivered to business and residential customersin Vermont and New Hampshire. Sovernet also delivers wholesale transportservices in New York State through its majority-owned subsidiary, ION. Sovernetcurrently holds 75% of the equity interest in ION.

 

·Choice Communications, LLC (“Choice”),a leading provider of fixed and portable wireless broadband data and dial-upinternet services to retail and business customers in the U.S. Virgin Islands.Choice was acquired by us in 1999 and is a wholly owned subsidiary. Choicediscontinued its wireless television service on May 31, 2009 to focusmainly on providing wireless broadband data services.

 

We provide management,technical, financial, regulatory, and marketing services to our subsidiariesand typically receive a management fee equal to approximately 3% to 5% of theirrespective revenues. Management fees from consolidated subsidiaries areeliminated in consolidation.

 

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The following chart, whichdoes not include operations under our AWCC subsidiary, summarizes the operatingactivities of our principal subsidiaries and the markets they serve as of March 31,2010:

 
| **Services**                    | ** ** | **Segment**                                | ** ** | **Operating Subsidiary**       | ** ** | **Markets**                                     |
|---------------------------------|------------|--------------------------------------------|------------|--------------------------------|------------|-------------------------------------------------|
| **Wireless**                    |       | Rural  Wireless                            |       | Commnet                        |       | United  States (rural markets)                  |
| ** **                      |       | Integrated  Telephony—  International |       | GT&T                       |       | Guyana                                          |
| ** **                      |       | Island  Wireless                           |       | BDC,  Islandcom                |       | Bermuda,  Turks and Caicos                      |
| **Local Telephone and Data**    |       | Integrated  Telephony—  International |       | GT&T                       |       | Guyana                                          |
| ** **                      |       | Integrated  Telephony—  Domestic      |       | Sovernet,  ION                 |       | United  States (New England and New York State) |
| ** **                      |       | Wireless  Data                             |       | Choice  (internet access) |       | U.S.  Virgin Islands                            |
| **International Long Distance** |       | Integrated  Telephony—  International |       | GT&T                       |       | Guyana                                          |

 

For information about our business segments and geographicalinformation about our operating revenues and long-lived assets, seeNote 10 to the Consolidated Financial Statements included in this Report.

 

We have been dependent on Commnet and GT&T for a majority of our revenuesand profits. For the three months ended March 31, 2010, approximately 81%of our consolidated revenue and all of our consolidated operating income weregenerated by these two operating subsidiaries.

 

Over the past five years, we have added substantially to the diversityof our business and reduced our historical dependence on our Guyana operationsfor a substantial majority of our revenue and profit. This reduction ofGT&T’s contribution is due mainly to the acquisition and growth of our U.S.wireless and wireline business and the 2008 increase in our ownership interestin our Bermuda operations and related acquisitions. Our recently completedAlltel Acquisition, completes this trend of diversification and we expect willresult in a significant majority of our revenue in the future quarters beinggenerated by U.S. domestic operations. However, we expect to continue actively evaluating additional investmentand acquisition opportunities that meet our return-on-investment and otheracquisition criteria.  Any suchadditional investments may further shift the geographic concentration of ourrevenue and cash flow sources.  Forinformation regarding the Alltel Acquisition see “Acquisition of Alltel Assets”below.

 

Duringthe three months ended March 31, 2010, our U.S. wholesale wirelessbusiness was the single largest contributor to our revenue and operatingincome. The revenues and profits of this U.S. wholesale wireless business areprimarily driven by the number of sites and base stations we operate, the amountof voice and data traffic that each of these sites generates, and the rate weget paid from our carrier customers on that traffic. Historically, the growthin same site voice and date volumes and the number of operated sites hasoutpaced the decline in rates.  However,in the first quarter of 2010, a significant decrease in the data rates almostoffset overall voice and data traffic growth. The growth of these revenues has historically been driven mainly by therate at which we expand the number of base stations we operate. We compete withwireless service providers that operate networks in its markets and offerwholesale roaming services as well. In addition, our carrier customers may alsoelect to build or acquire their own infrastructure (including networks that webuilt out pursuant to certain roaming agreements) in a market in which theyoperate, reducing or eliminating their need for our services in that market.For example, pursuant to a series of agreements that we entered into with alarge national carrier in connection with our build out of a wireless networkin certain parts of the Midwest, this carrier may, at their option beginning inApril 2010, purchase the network assets that Commnet now operates in thatarea.  This carrier’s exercise of itspurchase option, while providing a significant cash payment that we mightre-invest in other operating areas, likely would have a significant effect onour wholesale wireless revenue.  Inaddition, the 2009 acquisition by Verizon Wireless of Alltel Corporationassets, and pending acquisition of Alltel assets by AT&T, will result inour wholesale customers having their own infrastructure in certain marketswhere they are currently served by us. This is expected to result in asignificant loss of wireless wholesale revenue and operating income in futureperiods, which, if not offset by growth in other revenues generated or othersources could materially reduce our overall operating profits. While we are notable to precisely determine the extent of this revenue impact precisely at thistime, we expect that at the very least we will begin to experience lost revenuefrom those overlapping areas in 2010 which may more than offset any wholesalegrowth in that period.  For moreinformation regarding this segment, see the discussion of “Rural Wireless” inNote 10 to our Consolidated Financial Statements included in this Report.

 

The largest single component of our revenues and profits in the Guyanamarket has historically been from international long distance business, whichaccounted for approximately 14 % of our consolidated revenue during the threemonths ended March 31, 2010. The primary drivers of this long distancebusiness are the population of Guyanese living abroad who initiate calls toGuyana and the rate foreign carriers pay us for handling incoming internationalcalls and the number of people in Guyana with a wireless handset or fixedtelephone line. However, in recent years, we believe various methods of illegalbypass and alternative and cheaper media for communication, such as e-mail andtext messaging, may have had a negative impact on both voice traffic andinternational long distance revenues. Beginning in 2008, we believe there was asubstantial increase in illegal bypass activities. We have taken a number 

 

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ofmeasures to counter illegal bypass, including taking action against unlicensedoperators in Guyana, introducing special outbound call center rates, but wehave yet to see clear signs that those actions have significantly slowed thepace of bypass traffic growth. More recently, we also believe the currenteconomic recession has reduced the volume of calls into and out of Guyana andnegatively impacted our revenues.  Inaddition, long distance revenue was negatively impacted as a result of loweroutbound calling rates introduced in January 2010 as part of a promotionapproved by the regulatory authorities.

 

While the majority of this international long distance revenue isgenerated by calls originated by, or terminating with, our wireline andwireless customers, we are currently the exclusive provider of internationalvoice and data in Guyana and therefore generate revenue and profit from callsand data originating on our competitor’s wireless network pursuant to aninterconnection agreement. Digicel notified us that it terminated the agreementeffective January 2010. For more information about Digicel’s terminationof its interconnection agreement with us, please see “Recent Proceedings” underItem 3—Legal Proceedings in our 2009 Form 10-K.  While we expect that international longdistance revenue will represent less than 5% of overall revenue once we haveintegrated our newly acquired U.S. retail wireless assets, loss in this revenuecauses a disproportionate loss in operating income due to the fact that some ofthe largest costs related to this business are the capital costs of buildingand upgrading our international facilities and our local networks in Guyana.

 

In addition to our 2010 planned capital expenditures to expand andupgrade our Guyana networks, we will be investing over the next three months anadditional $4 million to $6 million in a new submarine fiber opticcable in Guyana. We have invested approximately $22.2 million in thiscable through March 31, 2010. The construction of this new internationalcable connecting Guyana to Trinidad will have the potential to provide forcontinued growth in the provision of high speed data and internet services intoGuyana, and give us a cost-effective method of increased redundancy. We believethis is particularly important in the current operating environment of aworldwide shift from voice-driven applications to data-driven applications andthe growth in broadband demand. We expect this cable to be operational mid-year2010.

 

As previously disclosed in our public reports, the Government of Guyanahas repeatedly stated its intention to introduce additional competition intoGuyana’s telecommunications sector and held formal discussions with us in early2008 regarding potential modifications or termination of our exclusivityrights. In October 2008, we were informally notified that the Governmenthad retained the services of a U.S. based law firm and a consultant to developthe legislative and regulatory reforms necessary to introduce telecommunicationcompetition in Guyana. Based on informal discussions with these parties, wecurrently expect draft legislation to be available during 2010. Our exclusivelicense has a stated initial term that expires in December 2010 and isaccording to its terms, renewable for an additional 20 year term at oursole option. In November 2009, we notified the Government of Guyana of ourelection to renew our exclusive license for an additional 20 years.

 

At this time, we do not know whether or how any draft legislation willaddress our exclusive license, and if so, whether it would be pursuant to anagreement between us and the Government. Other than entering into such anagreement on terms acceptable to us, we would seek to enforce our rights by lawand contract to be the exclusive provider of international voice and dataservices in Guyana. Although we believe that we would be entitled to damagesfor any involuntary termination of that license, we cannot guarantee that wewould prevail in any court or arbitration proceeding. See “Business—Regulation—Regulationof Our GT&T Subsidiary—Regulatory Developments” and “Risk Factors—Our exclusivelicense to provide local exchange and international voice and data services inGuyana is subject to significant political and regulatory risk” in our 2009 Form 10-K.

 

On May 8, 2009, Digicel filed a lawsuit in Guyana challenging thelegality of our exclusive license under Guyana’s constitution. Digicelinitially filed this lawsuit against the Attorney General of Guyana in the HighCourt. On May 13, 2009, we petitioned to intervene in the suit in order tooppose Digicel’s claims and that petition was granted on May 18, 2009. Wefiled its answer to the charge on June 22, 2009 and the case is pending.We believe that any legal challenge to our exclusive license granted in 1990 iswithout merit and we will vigorously defend against such a legal challenge.

 

**Acquisition of Alltel Assets**

 

OnApril 26, 2010, we completed our previously-announced acquisition ofwireless assets from Cellco Partnership d/b/a Verizon Wireless pursuant to thePurchase Agreement, dated June 9, 2009, by and between the Company and Verizon(the “Alltel Acquisition”).  Pursuant to the Alltel Acquisition, Verizoncontributed certain licenses, network assets, tower and other leases and otherassets and certain related liabilities to a wholly-owned subsidiary limitedliability company, whose membership interests were acquired by AWCC, ourwholly-owned subsidiary.  In connection with the acquisition, the Companyand Verizon entered into roaming and transition services arrangements and weobtained the rights to use the Alltel brand and related service marks for atwenty-eight year total term in connection with the continuing operation of theacquired assets.  The purchase price of the acquisition was $200 million,plus approximately $23 million in connection with a customary net workingcapital adjustment.

 

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**Stimulus Grants**

 

On August 20, 2009, we filed two applications for stimulus fundsmade available by the US Government under provisions of the American Recoveryand Reinvestment Act of 2009 intended to stimulate the deployment of broadbandinfrastructure and services to rural, unserved and underserved areas.

 

In December 2009, our fiber optic subsidiary, ION, was named toreceive a $39.7 million federal stimulus grant to fund its ION Upstate NewYork Rural Broadband Initiative, which involves building ten new segments offiber-optic, middle-mile broadband infrastructure, serving more than 70 ruralcommunities in upstate New York and parts of Pennsylvania and Vermont. The newproject will be undertaken through a public-private partnership between ION andthe Development Authority of the North Country (“DANC”), a New York Statepublic benefit corporation that owns and operates 750 miles of fiber opticnetwork and provides wholesale telecommunications transport services to voice,video, data and wireless service providers.

 

The $39.7 million grant, awarded to us by the NationalTelecommunications and Information Administration of the U.S. Department ofCommerce (“NTIA”), under its Broadband Technology Opportunities Program, willbe paid over the course of the project period as expenses are incurred, whichis expected to be within the next three years. An additional $9.9 millionwill be invested in the project by us and by DANC.

 

The funding of the new ION project is scheduled to occur in May 2010.Accordingly, the Company did not recognize any of the granted funds during thethree months ended March 2010. The results of our U.S. fiber optictransport business are included in the Company’s “Integrated Telephony-Domestic”segment as reported in Note 10 to our Consolidated Financial Statementsincluded in this Report.

 

On March 25, 2010 the NTIA awarded the Navajo Tribal UtilityAuthority (NTUA) a $32.1 million federal stimulus grant. The grant, along withpartial matching funds, will provide broadband infrastructure access to theNavajo Nation across Arizona, New Mexico and Utah. As part of the project, ourwholesale wireless subsidiary, Commnet, is partnering with NTUA to provide lastmile services through the company’s 4G LTE network. This network will allowNTUA to supply both fixed and mobile customers with high-speed broadbandaccess. The funding of this project is not scheduled to occur until later in2010, once the necessary environmental site work is completed.  Accordingly, we did not recognize any of thegranted funds during the three months ended March 2010.

 

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**Results of Operations**

 

***Three Months Ended March 31,2010 and 2009***

 
| ** **                                                                    | ** ** | **Three Months Ended  March 31,** | ** ** | **Amount of  Increase** | ** ** | **Percent  Increase** | ** ** |
|-------------------------------------------------------------------------------|------------|----------------------------------------|------------|-------------------------|------------|-----------------------|------------|
| ** **                                                                    | ** ** | **2009**                               | ** ** | **2010**                | ** ** | **(Decrease)**        | ** ** | **(Decrease)** | ** ** |
| ** **                                                                    | ** ** | **(In thousands)**                     | ** ** |
| **REVENUE:**                                                                  |       |                                   |       |                    |       |                  |       |   |   |
| Wireless                                                                      |       | $                                      | 31,725     |                    | $          | 33,122                |       | $ | 1,397 |   | 4.4 | % |
| Local  telephone and data                                                     |       | 13,053                                 |       | 13,704                  |       | 651                   |       | 5.0 |   |
| International  long distance                                                  |       | 10,401                                 |       | 7,859                   |       | (2,542                | )          | (24.4 | ) |
| Other                                                                         |       | 787                                    |       | —                  |       | (787                  | )          | (100.0 | ) |
| Total  revenue                                                                |       | 55,966                                 |       | 54,685                  |       | (1,281                | )          | (2.3 | ) |
| **OPERATING EXPENSES:**                                                       |       |                                   |       |                    |       |                  |       |   |   |
| Termination  and access fees                                                  |       | 10,446                                 |       | 10,677                  |       | 231                   |       | 2.2 |   |
| Internet  and programming                                                     |       | 789                                    |       | 421                     |       | (368                  | )          | (46.6 | ) |
| Engineering  and operations                                                   |       | 6,947                                  |       | 6,412                   |       | (535                  | )          | (7.7 | ) |
| Sales  and marketing                                                          |       | 3,592                                  |       | 4,105                   |       | 513                   |       | 14.3 |   |
| General  and administrative                                                   |       | 8,215                                  |       | 10,786                  |       | 2,571                 |       | 31.3 |   |
| Acquisition-related  charges                                                  |       | —                                 |       | 4,793                   |       | 4,793                 |       | 100.0 |   |
| Depreciation  and amortization                                                |       | 9,200                                  |       | 10,069                  |       | 869                   |       | 9.4 |   |
| Total  operating expenses                                                     |       | 39,189                                 |       | 47,263                  |       | 8,074                 |       | 20.6 |   |
| Income  from operations                                                       |       | 16,777                                 |       | 7,422                   |       | (9,355                | )          | (55.8 | ) |
| **OTHER INCOME (EXPENSE):**                                                   |       |                                   |       |                    |       |                  |       |   |   |
| Interest  expense                                                             |       | (1,157                                 | )          | (1,266                  | )          | (109                  | )          | (9.4 | ) |
| Interest  income                                                              |       | 340                                    |       | 154                     |       | (186                  | )          | (54.7 | ) |
| Other  income (expense), net                                                  |       | 26                                     |       | 4                       |       | (22                   | )          | (84.6 | ) |
| Other  income, net                                                            |       | (791                                   | )          | (1,108                  | )          | (317                  | )          | (40.1 | ) |
| **INCOME BEFORE INCOME TAXES**                                                |       | 15,986                                 |       | 6,314                   |       | (9,672                | )          | (60.5 | ) |
| Income  taxes                                                                 |       | 6,956                                  |       | 2,456                   |       | (4,500                | )          | (64.7 | ) |
| **INCOME BEFORE EQUITY IN EARNINGS OF UNCONSOLIDATED  AFFILIATE**             |       | 9,030                                  |       | 3,858                   |       | (5,172                | )          | (57.3 | ) |
| Equity  in earnings of unconsolidated affiliate                               |       | —                                 |       | —                  |       | —                |       | — |   |
| **NET INCOME**                                                                |       | 9,030                                  |       | 3,858                   |       | (5,172                | )          | (57.3 | ) |
| Net  income attributable to non-controlling interests                         |       | (228                                   | )          | 148                     |       | 376                   |       | 164.9 |   |
| **NET INCOME ATTRIBUTABLE TO ATLANTIC TELE-NETWORK, INC.  STOCKHOLDERS** |       | $                                      | 8,802      |                    | $          | 4,006                 |       | $ | (4,796 | ) | (54.5 | )% |

 

*Wireless revenue.*  Wireless revenue includes wholesale voice anddata roaming revenue from our rural U.S. operations, retail wireless revenuesgenerated in Guyana, and our retail wireless revenues generated by our IslandWireless segment in Bermuda and the islands.

 

Wireless revenue increased to $33.1 million for the three months ended March 31,2010 from $31.7 million for the three months ended March 31, 2009, anincrease of $1.4 million, or 4%. Our rural U.S. business increased its revenuesby $1.3 million, or 6%, to $22.9 million from $21.6 million for the threemonths ended March 31, 2010 and 2009, respectively.

 

The increase in wireless revenue from our U.S. wireless business wasdue primarily to continued deployment of additional GSM and CDMA wireless basestations and the expansion of our data capabilities, which generated growth inminutes of use and increased data revenue. As of March 31, 2010, a totalof 586 base stations were deployed as compared to 484 base stations as of March 31,2009. Our rural wireless revenue also increased as a result of growth in voiceand data traffic (measured in minutes and megabytes, respectively) at existingsites and growth in data roaming revenue. Such growth in voice and data trafficwas, however, partially offset by recent rate reductions. These rate reductionswere mostly made to our data rates for larger carriers and, in some cases, morethan offset the growth in data roaming volumes for those carriers.

 

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Verizon’s acquisition of Alltel and the AT&T acquisition of certainassets of Alltel, if approved by federal and regulatory authorities, will causesome loss of wireless revenue for us because certain network assets acquired byeach of Verizon and AT&T overlap geographically with Commnet’s U.S.network, of which they were our customers, in a substantial number of areas. Inaddition, the AT&T acquisition, if approved by the regulatory authorities,is expected to result in a significant additional loss in revenue when AT&Tcompletes its previously announced GSM network build in those areas. AT&Thas publicly stated its expectation that it will complete such an overlaywithin a year from closing the purchase. This loss in revenue could have asignificant negative impact on our revenues and operating income if it is notoffset or replaced by increased revenue in other areas of our U.S. ruralwireless business or from other sources (including increased revenue inconnection with our recently completed Alltel Acquisition).

 

While we expect to see a continued increase in wireless revenues fromour rural U.S. wireless business in geographical areas not impacted by Verizonor AT&T’s acquisition of Alltel Wireless networks, the pace of thatincrease in non-Alltel overlap markets may be slowed as compared to the growthin previous periods due to a reduction in the number of new sites and basestations added and scheduled reductions in revenue rates.  We also expect to receive a portion of the$32.1 million grant from the NTIA to build on the Navajo Nation during2010 but do not expect the network buildout, which will incur as a result ofthat grant, to significantly impact revenue during 2010.

 

Wireless revenue in Guyana increased by $0.7 million, or 14%, to$5.6 million for the three months ended March 31, 2010, from $4.9million for the three months ended 2009. Wireless subscribers in Guyana increased 13%, from approximately 254,000subscribers as of March 31, 2009 to approximately 286,000 subscribers asof March 31, 2010.

 

Whilewe have experienced this recent growth, competition remains intense, and thelargely pre-paid subscriber base means that subscribers and revenue could shiftrelatively quickly in future periods.  .In addition, the overall number of our wireless subscribers in Guyana could bereduced as a result of recent regulations imposed on Guyana telecommunicationscarriers, including our GT&T subsidiary, to collect proof of address andphotographic identification for all new and existing customers. Theserequirements mandate that the telecommunications carriers must obtain thisinformation or discontinue services to any undocumented subscribers. Theseregulations, which recently became effective, are part of broader legislationenacted by the Government requiring telecommunication carriers to implementprocedures and network changes intended to assist law enforcement activities.In the case of wireless customers, this data collection requirement was to becomplied with by December 18, 2009. GT&T has communicated to theGovernment the logistical difficulty of complying with its records requirementand the possibility for disruptions in service and the Government has indicatedthat while it may not immediately enforce the disconnection, it will urge allcarriers to use all possible avenues to collect this data.

 

Wireless revenue at our Island Wireless business decreased by $0.6million, or 12%, to $4.6 million from $5.2 million for the three months ended March 31,2010 and 2009, respectively. Wireless subscribers in Bermuda increasedmoderately to 20,500 for the three months ended March 31, 2010 from 20,200for the three months ended March 31, 2009, respectively.  We expect wireless revenue from our IslandWireless business to grow as we complete the expansion and upgrading of ournetwork in our early stage business in Turks and Caicos and launch new servicesin Bermuda.

 

*Local telephone and data revenue.*  Local telephone and data revenue is generatedby our wireline operations in Guyana, our integrated voice and data operationsin New England and New York State, and our data services in the U.S. VirginIslands. This revenue includes basic service fees, measured service revenue,and internet access fees, as well as installation charges for new lines,monthly line rental charges, long distance or toll charges (excludinginternational long distance charges in Guyana), maintenance and equipmentsales.

 

Local telephone and data revenue increased by $0.6 million, or 5%, to$13.7 million for the three months ended March 31, 2010 from$13.1 million for the three months ended March 31, 2009. The increaseis attributable to both the U.S. and Guyana markets. In the U.S., we increasedrevenues by $0.3 million, mainly as a result of growth at ION, which weacquired on August 15, 2008. We continue to add business customers for ourvoice and data services; however, the overall revenue increase is partiallyoffset by the decline in the residential data business, particularly dial-upinternet services. Local telephone and data revenue in Guyana increased $0.3million, or 4%, to $7.7 million for the three months ended March 31,2010 from $7.4 million for the three months ended March 31, 2009. Ouraccess lines in Guyana grew from approximately 140,000 lines as of March 31,2009 to approximately 148,000 lines as of March 31, 2010 (an increase of6%). Revenue from the growth in access lines has been partially offset by adecrease in usage that is likely due to wireless service alternatives. Datarevenue from our U.S. Virgin Islands operations remained consistent at $1.0million for the three months ended March 31, 2010 and 2009, respectively.

 

In future periods, we anticipate that local telephone and data revenuewill increase modestly as a result of network expansion, subscriber and accessline growth, and high-speed data sales in New York, New England and Guyana.While we expect to expand our 

 

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networkand receive a portion of the $39.7 million grant during 2010, we do notexpect the network buildout to significantly impact revenue during 2010 sincethe buildout will not be complete.

 

*International long distance revenue.*  International long distance revenue isgenerated by international telephone calls into and out of Guyana and does notinclude international long distance revenue generated by our other operations.

 

Inbound traffic, which made up 75% of all international long distancetraffic and 69% of international long distance revenue for the three monthsended March 31, 2010, is settled in U.S. dollars. Inbound trafficconstituted a smaller portion of overall international traffic in the firstquarter of 2010 than historic norms. However, we expect outbound calling to continue at or about this level,or perhaps increase, as a result of lower outbound calling rates (as discussedbelow).  International long distancerevenue was $7.9 million for the three months ended March 31, 2010, adecrease of $2.5 million, or 24%, from $10.4 million for the three monthsended March 31, 2009. We believe this decrease is a result of continuedand considerable illegal bypass activities resulting in lost revenueopportunities, as well as an overall reduction in call volume into Guyanaattributable to the current difficult global economic environment.

 

International voice traffic may also be declining as a result of thegrowth of alternative and cheaper media for communications, such as e-mail andtext messaging. That shift to alternatives may grow faster in the future as weexpand our data offerings in the market. Although the other modes ofcommunication may cause a decline in both voice traffic and in internationallong distance revenues in future periods, we may see a slight increase intraffic and revenues if we are effective in combating illegal bypass. We havetaken a number of measures to counter illegal bypass, but have had limitedsuccess to date. These measures include taking action against unlicensedoperators in Guyana, introducing special outbound call center rates, and we areexamining automated technical solutions as well. The outcome of negotiationswith the Government of Guyana regarding the exclusivity terms of our license isalso likely to negatively impact this revenue in the future. In January 2010,we launched a promotion significantly lowering international calling rates tocertain destinations. We expect this to stimulate traffic volumes but expect itstill may result in a further revenue decline given the size of the ratereduction. This promotion was initially set to expire on March 31, 2010,but we were able to obtain an extension from the Public Utilities Commission(PUC) to continue the promotion through June 30, 2010.

 

*Other revenue.*  Other revenue represents revenue fromwireless digital television services in the U.S. Virgin Islands, which wasdiscontinued in May 2009. The Company terminated its wireless televisionservices in order to focus solely on providing wireless broadband data anddialup internet services.  Due to the termination of these services, wewill no longer recognize other revenue relating to digital television services.

 

*Termination and access fee expenses*.  Termination and access fee expenses arecharges that we pay for voice and data transport circuits (in particular, thecircuits between our rural wireless sites and our switches), internet capacityand other access fees we pay to terminate our calls.  Termination and access fees increased by$0.3 million, or 3%, from $10.4 million for the three months ended March 31,2009 to $10.7 million for the three months ended March 31, 2010, as aresult of increased traffic.

 

Termination and access fees are expected to increase in future periods,but remain fairly consistent as compared to their related revenues, as our U.S.wireless and, to a lesser extent, wireline operations in the U.S. and Guyanaexpand.

 

*Internet and programming expenses.*  Internet and programming expenses includeinternet connectivity charges and digital television programming.  Internet and programming expenses decreasedfrom $0.8 million for the three months ended March 31, 2009 to$0.4 million for the three months ended March 31, 2010. This decreasewas a result of a decrease in expenses from the U.S. Virgin Islands, as weterminated our digital television service on May 31, 2009. We expectinternet and programming expenses to expand starting in the second quarter of2010 due to our acquisition of Alltel and growth in our high speed data serviceacross most of our operations.

 

*Engineering and operations expenses.*  Engineering and operations expenses includethe expenses associated with developing, operating, supporting and expandingour networks, including the salaries and benefits paid to employees directlyinvolved in the development and operation of our networks.  Engineering and operations expenses decreasedby $0.5 million, or 7%, from $6.9 million for the three months ended March 31,2009 to $6.4 million for the three months ended March 31, 2010. Thisdecrease is primarily the result of a decrease in expenses from the U.S. VirginIslands, as we terminated our digital television service on May 31,2009.  We expect that engineering andoperations expenses will increase in the future as our networks expand andrequire additional support and as we transition the network that we recentlyacquired as part of our Alltel Acquisition.

 

*Sales and marketing expenses.*  Sales and marketing expenses include salariesand benefits we pay to sales personnel, customer service expenses, salescommissions and the costs associated with the development and implementation ofour promotion and marketing campaigns.

 

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Sales and marketing expenses increased by $0.5 million, or 14%,from $3.6 million for the three months ended March 31, 2009 to$4.1 million for the three months ended March 31, 2010. The majorityof this increase is the result of increased promotions in Guyana in the firstquarter of 2010, which have been extended through June 30, 2010.

 

We expect that sales and marketing expenses for our operations willremain fairly consistent as a percentage of related revenues in the nearfuture.  Due to our Alltel Acquisition,we expect that sales and marketing expenses will increase substantially infuture periods in the United States.

 

*General and administrative expenses.*  General and administrative expenses includesalaries, benefits and related costs for general corporate functions, includingexecutive management, finance and administration, legal and regulatory,facilities, information technology and human resources.  General and administrative expenses alsoinclude internal costs associated with our pending or completed acquisitions.

 

General and administrative expenses increased by $2.6 million, or 32%,from $8.2 million for the three months ended March 31, 2009 to $10.8million for the three months ended March 31, 2010. Of this increase,$2.1 million was the result of increased overhead to support our growthand internal costs associated with our Alltel Acquisition, which was completedin April 2010.

 

While the Alltel Acquisition has been completed, we expect overallgeneral and administrative expenses to increase in order to aid our transitionefforts and to support our growth but to remain roughly consistent as comparedto our consolidated revenues.

 

*Acquisition-related charges.*  Acquisition-related charges include theexternal costs, such as legal and consulting, directly associated withacquisition related activities, which are expensed as incurred.Acquisition-related charges do not include internal costs, such as employeesalary and travel-related expenses, which we incurred during the three monthsended March 31, 2010 in connection with the pending Alltel Acqusition.

 

For the three months ended March 31, 2010, acquisition-relatedcharges were $4.8 million, all of which were attributable to the April 2010Alltel Acquisition.

 

Although the Alltel Acquisition has been completed, we expect thatacquisition-related expenses will continue to be incurred unrelated to theAlltel Acquisition and at a much reduced level, as the Company continues toexplore any additional acquisition opportunities that arise and may meet itsinvestment objectives.

 

*Depreciation and amortization expenses.*  Depreciation and amortization expensesrepresent the depreciation and amortization charges we record on our propertyand equipment and on our intangible assets.

 

Depreciation and amortization expenses increased by $0.9 million,or 10%, from $9.2 million for the three months ended March 31, 2009to $10.1 million for the three months ended March 31, 2010. Theincrease is primarily due to the addition of fixed assets from our networkexpansion in our rural U.S. wireless business.

 

We expect depreciation and amortization expenses to continue toincrease as a result of a future network expansion in the U.S. and elsewhere.

 

*Interest expense.*  Interest expense represents interest incurredon our outstanding credit facilities.

 

Interest expense increased from $1.2 million for the three monthsended March 31, 2009 to $1.3 million for the three months ended March 31,2010. The increase in interest expense was due to the amendment of our existingcredit facility. As described in Note 6 to the Consolidated FinancialStatements, the Company entered into an amended and restated credit agreementon January 20, 2010.  As of March 31,2010, we had $73.9 million outstanding under our 2010 Term Loan Afacility.  We had no outstandingborrowings under our revolving line of credit during the three months ended March 31,2009 or 2010.

 

Our draw-downs under the Amended Credit Facility, in connetion with theAlltel Acquisition in April 2010, will increase the Company’s interestexpense in the future.  For a discussionof the Company’s 2010 Credit Facility, please see Note 6 to the ConsolidatedFinancial Statements.

 

*Interest income.*  Interest income represents interest earned onour cash, cash equivalents and short term investments.

 

Interest income decreased to $0.2 million from $0.3 millionfor the three months ended March 31, 2010 and 2009, respectively. Thisdecrease is a result of a decrease in the interest rates and subsequent amountsearned on our cash and investments.

 

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Weexpect that our interest income will decrease in the short term as a result ofour usage of cash to partially fund the purchase price of the AlltelAcquisition. 

 

*Income taxes.*  The effective tax rate was 44% for the threemonths ended March 31, 2009 and 39% for the three months ending March 31, 2010.Income tax expense includes federal and state income taxes at their respectivestatutory rates as well as the Guyanese income taxes in excess of the statutoryU.S. income tax rates. Since we operate in jurisdictions that have a wide rangeof statutory tax rates, our consolidated effective tax rate is impacted by themix of income generated in those jurisdictions as well as the receipt ofdividends from our foreign subsidiaries.

 

*Net Income Attributable to Non-Controlling Interests.*  Net income attributable to non-controllinginterests consists of the Guyana government’s 20% interest in GT&T, anon-controlling shareholder’s 4% interest in Sovernet, other non-controllingshareholders’ interests in certain consolidated subsidiaries of BDC, Commnetand Sovernet, and non-controlling shareholders’ 42% equity interest in BDC.

 

Net income attributable to non-controlling interests decreased from$0.2 million of expense for the three months ended March 31, 2009 to a $0.1 milliongain for the three months ended March 31, 2010. This decrease was a result ofthe allocation of non-controlling shareholders’ share of losses in two earlystage businesses (ION and Islandcom).

 

*Net income attributable to Atlantic Tele-Network, Inc.Stockholders.*  As a resultof the above factors, net income decreased to $4.0 million for the three monthsended March 31, 2010 from $8.8 million for the three months ended March 31,2009. On a per share basis, net income decreased from $0.58 per basic anddiluted share to $0.26 per basic and diluted share for the three months ended March31, 2009 to 2010, respectively.

 

*Segment results.*  We currently have five material operatingsegments, which we manage and evaluate separately: (1) Rural Wireless; (2) IntegratedTelephony—International; (3) Island Wireless; (4) IntegratedTelephony—Domestic; and (5) Wireless Data.. Segment results are set forth inNote 10 to the Consolidated Financial Statements included in this Report.

 

**Regulatoryand Tax Issues**

 

We are involved in a number of regulatory and tax proceedings. See Note11 to the Consolidated Financial Statements included in this Report. A materialand adverse outcome in one or more of these proceedings could have a materialadverse impact on our financial condition and future operations.

 

**Liquidityand Capital Resources**

 

Historically, we have met our operational liquidity needs through acombination of cash on hand and internally generated funds and have fundedcapital expenditures and acquisitions with a combination of internallygenerated funds, cash on hand and borrowings under our credit facilities.

 

In April 2010, we fundedthe purchase price of the Alltel Acquisition with cash-on-hand and borrowingsunder our existing credit facility.  Wedrew down a $150 million term loan under the credit facility and borrowed $40million under our previously undrawn $75 million revolving credit facility.

 

***Uses of Cash***

 

*Capital Expenditures.*  A significant use of our cash has been forcapital expenditures to expand and upgrade our networks. For the three monthsended March 31, 2009 and 2010, we spent approximately $10.0 million and $16.9 millionon capital expenditures, respectively. Of the $16.9 million of 2010 capitalexpenditures, we spent approximately $4.4 million expanding our U.S. wholesalewireless network by increasing the number of base stations as well as switchingand cell site equipment required to expand our geographic coverage andtechnical capabilities. In Guyana, we spent approximately $6.0 million oncapital expenditures, of which $4.3 million was related to construction costson a new fiber optic submarine cable into the country which is expected to beready for use during mid-2010, while the remainder of the capital expendituresin Guyana was for the expansion of the capacity and coverage of our wirelineand wireless network. In addition, we invested $4.4 million in capitalexpenditures related to a wireless network build-out in the U.S. VirginIslands, which is expected to launch mid-2010. A majority of the remainingconsolidated capital expenditures was incurred by our Island Wireless segmentin connection with our network development in Turks and Caicos, which isscheduled to be operational during mid-2010.

 

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We are continuing to invest in expanding our networks in many of ourmarkets and expect to incur capital expenditures between $125 million and $135 millionin 2010.  The majority of theseexpenditures, and the increase from our previous estimate, relate to our U.Swireless business.  Specifically weanticipate expenditures of between $60 million to $80 million in our U.S.retail wireless business primarily related to one-time costs for networkmigration and information technology and system conversion costs in conjunctionwith our integration of our newly acquired awireless assets.  However, we are still evaluating numerouscapital projects that we inherited with our Alltel Acquisition that may impactthis number.  This 2010 estimate alsoincludes approximately $15 million to $20 million relating to the constructionof the submarine fiber optic cable in Guyana and wireless network build-out inthe U.S. Virgin Islands, some of which was incurred in the first quarter of2010.  We expect to fund our currentcapital expenditures primarily from cash generated from our operations, andborrowings against our new line of credit. We may also seek to access additional borrowing capacity under our bankcredit facility.

 

*Acquisitions and Investments.*  Historically, we have funded our acquisitionswith a combination of cash on hand and borrowings under our credit facilities. In April 2010, we funded the purchaseprice of the Alltel Acquisition with cash-on-hand and borrowings under ourexisting credit facility.  We drew down a$150 million term loan under the credit facility and borrowed $40 million underour previously undrawn $75 million revolving credit facility.

 

We also continue to explore opportunities to acquire communicationsproperties or licenses in the United States, the Caribbean and elsewhere. Wealso explore opportunities to substantially expand our existing networks andtechnologies in the United States and the Caribbean. Such acquisitions mayrequire external financing. While there can be no assurance as to whether, whenor on what terms we will be able to acquire any such businesses or licenses ormake such investments, such acquisitions may be accomplished through theissuance of shares of our Capital Stock, payment of cash or incurrence ofadditional debt.  From time to time, wemay raise capital ahead of any definitive use of proceeds to allow us to movemore quickly and opportunistically if an attractive investment materializes.

 

*Dividends.*  We use cash on hand to make dividend paymentsto our common stockholders when declared by our Board of Directors. For thethree months ended March 31, 2010, our dividends to our stockholdersapproximated $3.1 million, which reflects dividends declared on April 1, 2010,and paid on April 19, 2010. We have paid quarterly dividends for the last 46fiscal quarters.

 

*Stock Repurchase Plan.*  Our Board of Directors approved a $5.0 millionstock buyback plan in September 2004 pursuant to which we have spent $2.1 millionas of March 31, 2010 repurchasing common stock. We may repurchase shares at anytime depending on market conditions, our available cash and our cash needs. Wedid not repurchase any shares under this plan during the three months ended March31, 2010.

 

*Cash Generated by Financing Activities.*  On January 20, 2010, we amended and restated our 2008Credit Facility with CoBank as Administrative Agent. (the “2010 CoBank CreditAgreement”). The 2010 CoBank Credit Agreement provides for a $298.9 millioncredit facility, consisting of a $73.9 million term loan (the “2010 Term Loan A”),a $150.0 million term loan (the “2010 Term Loan B”) and a $75.0 millionrevolver loan (the “2010 Revolver Loan,” and together with the 2010 Term Loan Aand 2010 Term Loan B, the “2010 Credit Facility”). The 2010 CreditFacility also provides for one or more additional term loans up to an aggregate$50.0 million, subject to lender and administrative agent approval.

 

Upon the closing of the 2010 Credit Facility, $73.9 million wasoutstanding under the 2010 Term Loan A, an amount equal to the outstandingprincipal amount under the 2008 Term Loan. We funded a portion of the purchaseprice of the Alltel Acquisition with the $150 million 2010 Term Loan B andborrowed $40 million under our previously undrawn $75 million 2010 RevolverLoan.

 

The 2010 Term Loan A and the 2010 Term Loan B eachmature on September 30, 2014, unless accelerated pursuant to an event ofdefault, as described below. The 2010 Revolver Loan matures on September 10,2014, unless accelerated pursuant to an event of default, as described below.Amounts borrowed under the 2010 Term Loan A, 2010 Term Loan B and the 2010Revolver Loan bear interest at a rate equal to, at our option, either (i) theLondon Interbank Offered Rate (LIBOR) plus an applicable margin ranging between3.50% to 4.75% or (ii) a base rate plus an applicable margin ranging from 2.50% to 3.75%. Weare not required to apply a minimum LIBOR percentage for any loans bearinginterest at the LIBOR rate. The base rate is equal to the higher of either (i) 1.50%plus the higher of (x) the one-week LIBOR and (y) the one-month LIBOR and (ii) theprime rate (as defined in the credit agreement). The applicable margin isdetermined based on the ratio of our indebtedness (as defined in the creditagreement) to our EBITDA (as defined in the credit agreement).

 

All amounts outstandingunder the 2010 Revolver Loan will be due and payable upon the earlier of thematurity date or the acceleration of the loan upon an event of default. Amountsoutstanding under the 2010 Term Loan A and the 2010 Term Loan B became due andpayable commencing on March 31, 2010 and June 30, 2010, respectively,  in quarterly payments equal to 1.25% of theinitial principal amount outstanding under each loan, increasing to 2.50% ofthe initial principal amount outstanding commencing

 

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on March 31, 2012.Remaining balances will be due and payable upon maturity, unless the loans areaccelerated upon an event of default.

 

Certain subsidiaries,including AWCC, Commnet, Sovernet and Choice are guarantors of our obligationsunder the 2010 CoBank Credit Agreement. Further, our obligations are secured by(i) a first priority, perfected lien on substantially all of our property andassets and the guarantor subsidiaries, including its principalwholly-owned domestic operating subsidiaries and (ii) a pledge of 100% of theCompany’s equity interests in certain domestic subsidiaries and up to 65% ofthe equity interests outstanding of certain foreign subsidiaries, in each case,including the Company’s principal operating subsidiaries.

 

The 2010 CoBank Credit Agreement provides for events of defaultcustomary for credit facilities of this type, including but not limited tonon-payment, defaults on other debt, misrepresentation, breach of covenants,representations and warranties, insolvency and bankruptcy. After the occurrenceof an event of default and for so long as it continues, the administrativeagent or the requisite lenders (as defined in the credit agreement) mayincrease the interest rate then in effect on all outstanding obligations by2.0%. Upon an event of default relating to insolvency, bankruptcy orreceivership, the amounts outstanding under the 2010 Credit Facility willbecome immediately due and payable and the lender commitments will beautomatically terminated. Upon the occurrence and continuation of any otherevent of default, the administrative agent and/or the requisite lenders (asdefined in the credit agreement) may accelerate payment of all obligations andterminate the lenders’ commitments under the 2010 CoBank Credit Agreement.

 

On September 23, 2008, we executed a forward starting interest rateswap. Our objective in using the derivative is to add stability to interest expenseand to manage our exposure to adverse changes in interest rates. The interestrate swap has an initial notional amount of $68 million, receives 1 monthLIBOR, and pays a fixed rate of 4.42%. The interest rate swap agreementeffectively converts the variable interest payments on the first $68 million ofour term debt to a fixed rate of 4.42% plus our credit spread, over the life ofthe agreement. The interest rate swap agreement has a maturity date of September15, 2015.

 

***Sources of Cash***

 

*Total Liquidity at March 31, 2010.*  As of March 31, 2010, we had approximately$79.0 million in cash and cash equivalents, a decrease of $11.2 million fromthe December 31, 2009 balance of $90.2 million. In addition, the Company has$2.4 million in restricted cash escrowed for payment on the undersea cable inGuyana. While we currently believe our existing cash balances and other capitalresources, including the $35.0 million available under our revolving line ofcredit included in our credit facility, are adequate to meet our currentoperating and capital needs, we may seek additional financing outside of ourcurrent credit facility.

 

*Cash Generated by Operations.*  Cash provided by operating activities was$10.1 million for the three months ended March 31, 2010 compared to $16.7 millionfor the three months ended March 31, 2009. The decrease of $6.6 million wasprimarily due to a reduction in net income for the three months ended March 31,2010 as compared to March 31, 2009.

 

***Factors Affecting Sources of Liquidity***

 

*Internally Generated Funds.*  The key factors affecting our internallygenerated funds are demand for our services, competition, regulatorydevelopments, economic conditions in the markets where we operate ourbusinesses and industry trends within the telecommunications industry. For adiscussion of tax and regulatory risks in Guyana that could have a materialadverse impact on our liquidity, see “Risk Factors—Risks Relating to OurWireless and Wireline Services in Guyana”, and “Business—Regulation of OurGT&T Subsidiary” in our 2009 Form 10-K and Note 11 to the CondensedConsolidated Financial Statements included in this Report.

 

*Restrictions Under Credit Facility.*  The 2010 CoBank Credit Agreement contains customaryrepresentations, warranties and covenants, including covenants by us limitingadditional indebtedness, liens, guaranties, mergers and consolidations,substantial asset sales, investments and loans, sale and leasebacks,transactions with affiliates and fundamental changes. In addition, the 2010Credit Facility contains financial covenants by us that (i) impose a maximumratio of indebtedness (as defined in the credit agreement) to EBITDA (asdefined in the credit agreement), (ii) require a minimum ratio of EBITDA tocash interest expense, (iii) require a minimum ratio of equity to consolidatedassets and (iv) require a minimum ratio of EBITDA to fixed charges (as definedin the credit agreement). As of March 31, 2010, we were in compliance with allof the financial covenants of the 2010 CoBank Credit Agreement.

 

*Capital Markets.*  Our ability to raise funds in the capitalmarkets depends on, among other things, general economic conditions, theconditions of the telecommunications industry, our financial performance, thestate of the capital markets and our compliance with Securities and ExchangeCommission (“SEC”) requirements for the offering of securities. In June 2009,the Company’s “universal” shelf registration statement filed with the SECexpired by its own terms.  On May 7,2010, we filed with the 

 

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SECa new “universal” shelf registration statement. If declared effective by theSEC, such filing will register potential future offerings by the Company of theCompany’s securities.

 

**Recent Accounting Pronouncements**

 

In January 2010, the FASBissued updated guidance to amend the disclosure requirements related torecurring and nonrecurring fair value measurements. This update requires newdisclosures on significant transfers of assets and liabilities in and out ofLevel 1 and Level 2 of the fair value hierarchy (including the reasons forthese transfers) and also requires a reconciliation of recurring Level 3 measurementsabout purchases, sales, issuances and settlements on a gross basis. In additionto these new disclosure requirements, this update clarifies certain existingdisclosure requirements. For example, this update clarifies that reportingentities are required to provide fair value measurement disclosures for eachclass of assets and liabilities rather than each major category of assets andliabilities. This update also clarifies the requirement for entities todisclose information about both the valuation techniques and inputs used inestimating Level 2 and Level 3 fair value measurements. This update iseffective for companies with interim and annual reporting periods after December15, 2009, except for the requirement to provide the Level 3 activity of purchases,sales, issuances, and settlements on a gross basis, which will become effectivefor interim and annual reporting periods beginning after December 15, 2010. TheCompany adopted the updated guidance in the first quarter of 2010 and theadoption did not have an impact on the Company’s financial position, results ofoperations, or cash flows.

 

In June 2009, the FASBissued new authoritative guidance that amends certain guidance for determiningwhether an entity is a variable interest entity (VIE). The guidance requires anenterprise to perform an analysis to determine whether the Company’s variableinterests give it a controlling financial interest in a VIE. A company would berequired to assess whether it has an implicit financial responsibility to ensurethat a VIE operates as designed when determining whether it has the power todirect the activities of the VIE that most significantly impact the entity’seconomic performance. In addition, this guidance amends earlier guidancerequiring ongoing reassessments of whether an enterprise is the primarybeneficiary of a VIE. The guidance is effective for the Company for fiscal year2010. The adoption of the provisions of this guidance, which was effective January1, 2010, did not have a material impact on the consolidated financialstatements.

 

**ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

 

*Foreign Currency Exchange Sensitivity.*  GT&T’s functional currency is the U.S.dollar because a significant portion of GT&T’s revenues and expendituresare transacted in U.S. dollars. The results of future operations neverthelessmay be affected by changes in the value of the Guyana dollar, however theGuyanese exchange rate has remained at approximately $205 Guyana dollars to $1U.S. dollar since 2004 so we have not recorded any foreign exchange gains orlosses since that date. All of our other foreign subsidiaries operate injurisdictions where the US dollar is the recognized currency.

 

*Interest Rate Sensitivity.*  Our exposure to changes in interest rates islimited and relates primarily to our variable interest rate long-term debt. Asof March 31, 2010, $68.0 million of our long term debt has a fixed rate by wayof an interest-rate swap that effectively hedges our interest rate risk. Theremaining $5.0 million of long term debt as of March 31, 2010, is subject tointerest rate risk. As a result of our hedging policy we believe our exposureto fluctuations in interest rates is not material.

 

**ITEM4. CONTROLS AND PROCEDURES**

 

Our management, with the participationof our Chief Executive Officer and Chief Financial Officer, evaluated theeffectiveness of our disclosure controls and procedures as of March 31,2010.  The term “disclosure controls andprocedures,” as defined in Rules 13a-15(e) and 15d-15(e) underthe Securities Exchange Act of 1934, as amended (the “Exchange Act”), meanscontrols and other procedures of an issuer that are designed to ensure thatinformation required to be disclosed by the issuer in the reports that it filesor submits under the Exchange Act is recorded, processed, summarized andreported, within the time periods specified in the SEC’s rules andforms.  Disclosure controls andprocedures include, without limitation, controls and procedures designed toensure that information required to be disclosed by an issuer in the reportsthat it files or submits under the Exchange Act is accumulated and communicatedto the issuer’s management, including its principal executive and principalfinancial officers, as appropriate to allow timely decisions regarding requireddisclosure.  Management recognizes thatany controls and procedures, no matter how well designed and operated, canprovide only reasonable assurance of achieving their objectives and managementnecessarily applies its judgment in evaluating the cost-benefit relationship ofpossible controls and procedures.  Basedon the evaluation of our disclosure controls and procedures as of March 31,2010, our Chief Executive Officer and Chief Financial Officer concluded that,as of such date, our disclosure controls and procedures were effective at thereasonable assurance level to ensure that information required to be disclosedby us in reports that we file or submit under the Exchange Act is recorded,processed, summarized and reported within the time periods specified inSecurities and Exchange Commission rules and forms and is accumulated andcommunicated to our management, including our Chief Executive Officer and ChiefFinancial Officer as appropriate to allow timely decisions regarding requireddisclosure.

 

*Changesin internal control over financial reporting.*There was no change in the internal control overfinancial reporting that occurred during the three months ended March 31, 2010that has materially affected, or is reasonably likely to materially affect, our

 

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internal control overfinancial reporting.

 

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**PART II—OTHER INFORMATION**

 

**Item1. Legal Proceedings**

 

See Note 11 to theCondensed Consolidated Financial Statements included in this Report.

 

**Item 1A. Risk Factors**

 

Inaddition to the other information set forth in this Report, you shouldcarefully consider the factors discussed in Part I, “Item 1A. RiskFactors” in our 2009 Form 10-K, which could materially affect ourbusiness, financial condition or future results. The risks described in our2009 Form 10-K and those set forth in this Report are not the only risksfacing our Company.  Additional risks anduncertainties not currently known to us or that we currently deem to beimmaterial also may materially adversely affect our business, financialcondition and/or operating results.

 

OnApril 26, 2010, the Company completed the purchase of certain formerAlltel wireless assets from Verizon Wireless for a total purchase price of $223million.  As a result of this acquisition, the Company through a newwholly owned subsidiary is now operating a retail wireless business in theUnited States that serves approximately 895,000 subscribers in rural areas ofGeorgia, North Carolina, South Carolina, Illinois, Ohio and Idaho.  The Company has set forth the followingadditional risk factors relating to its new U.S. retail wireless business,which should be read in conjunction with the other risk factors applicable tothe Company and its businesses discussed in Part I, “Item 1A. RiskFactors” in our 2009 Form 10-K:

 

***If we have difficulties integrating our newly acquired U.S. retailwireless business,******our business, financial condition and results ofoperations could be adversely affected.***

 

Our Alltel Acquisition is thelargest and most significant acquisition we have undertaken.  As part of that, we have established aheadquarters for this business in Arkansas, recruited a management team andheadquarter personnel to operate the wireless assets as a stand-alone business(through a new subsidiary, Allied Wireless Communications Corporation(“AWCC”)), and added approximately 540 former Alltel employees that work in theacquired service markets. We expect that we will be required to devote a significant amount oftime and attention to integrating these operations with our existing USwireless network and technical operations team.   Among the challenges are (1) the needto integrate a large number of new employees, (2) the need to transitionor “re-home” some of the acquired field network facilities to newly built, orother newly acquired, switching and other core network facilities and (3) integratingand aligning numerous business and work processes by building and designing ourown processes and the information systems necessary to track and handle thoseprocesses.  The integration process poseschallenges not found in many acquisitions because of the fact that we haveacquired assets and customers that were part of a much larger whole and we needto operate those assets on a much smaller scale and design systems andprocesses with that in mind.  We arecurrently dependent on transition services provided by Verizon Wireless for theoperation of the Alltel assets, including critical billing and informationtechnology systems and customer services, under an agreement that is set toexpire in April 2011.  If we fail toestablish our own infrastructure and business systems sufficiently before theone-year anniversary, we may be forced to seek an extension of some of theservices provided under the transition services agreement, which may not beavailable to us at all or only on unfavorable terms.  Significant unexpected difficulties intransitioning billing, inventory, point-of-sale systems or other systems  or the need to seek extended transitionservices from Verizon Wireless could materially and negatively impact ourcustomers’ experience leading to widespread dissatisfaction, higher rates ofcustomer churn, unsatisfactory employee relations, increased expense andreduced collected revenue.

 

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This isparticularly the case if we have difficulty transitioning customer support andbilling.    If any of the above eventswere to occur or if we have other difficulties with the transitionprocess,  it could harm our reputationand have a material adverse effect on our business, financial condition orresults of operations.

 

***Intense competition in theU.S. retail wireless industry and our smaller scale, relative to largernational or regional wireless carriers could adversely affect our business,financial condition or results of operations.***

 

Competition in theU.S. retail wireless industry is currently intense and could intensify furtherin the future due to the general effects of a weak economy, as well as due towireless industry factors such as increased market saturation and aggressiveprice reductions.  Our main competitorsare national or global telecommunications companies that are much larger thanus.  These carriers possess greaterresources and much greater economies of scale that gives them a significantcost advantage in many areas.  Thenational carriers can deploy new network technologies and mobile handsets anddevices more rapidly and at a lower cost. The national and larger regional carriers typically also have broaderradio spectrum holdings, giving them the ability to launch multiple technologiesand to devote more bandwidth to a given voice or data service.  Due to our smaller scale, we may be unable tocompete successfully with larger companies that have substantially greaterfinancial, technical, marketing, sales, purchasing and distribution resources,which could adversely affect our revenues and costs of doing business.

 

In particular, ourbusiness depends on our access to new handsets and other devices and to alesser extent, content for data, music or video services, being developed byvendors.  Because of their buying power and the relationships they havecreated with vendors, the large national carriers have a significant advantagein pushing the development of new technologies and taking advantage of thosetechnologies.  For example, in the past,they have entered into deals with device vendors giving them the exclusiveright to sell the latest mobile devices for a period of time.  In addition, we depend on the relationshipsthat we currently have with large “big box” and other distribution vendors,such as Wal-Mart, for a substantial amount of sales.  If we are unable to maintain theserelationships, obtain new handsets being developed by vendors at favorablepricing and quantities as a result of our decreased purchasing resources orobtain timely access to content for data, music or video services, our  business, financial condition or results ofoperations could be adversely affected.

 

***Due to the “island” natureof our newly acquired U.S. wireless network, if we are unable to obtain theroaming services we need from other carriers to operate competitively, ourprofitability and other results of operations could be adversely affected.***

 

The wirelessassets that we acquired were historically operated as part of a nationalnetwork, whose customers valued nationwide coverage and support.  As a result of the regulatory-requireddivestiture of these assets, many of our new markets are now non-contiguous andare anticipated to require network expansion and improvements as well asroaming support to ensure ongoing nationwide coverage.  We believe nationwide coverage is importantto a large portion of our customer base.

 

Many of our competitors have regional or nationalnetworks which may enable them to offer automatic roaming services to theirsubscribers at a lower cost than we can offer. We currently have roaming agreements in place with several largercarriers, including Verizon Wireless, our main competitor, and expect to enterinto additional roaming agreements with other carriers.  We expect that we will be highly dependent onthe roaming services we use from a mix of our competitors and othercarriers.  If we are unable to obtain ormaintain roaming agreements with other wireless carriers that contain pricingand other terms that are competitive and acceptable to us and that satisfy ourquality and

 

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interoperabilityrequirements, our business, financial condition or results of operations couldbe adversely affected.

 

At the same time,any failure to successfully build out and enhance our U.S. wireless network andnecessary support facilities and systems in a cost-effective manner, and in amanner that satisfies customer expectations for quality and coverage, couldhave an adverse effect on our business, business prospects, financial conditionor results of operations. Any difficulties encountered in completing theseactivities, as well as problems in vendor equipment availability, technicalresources, system performance or system adequacy, could delay expansion ofoperations and product capabilities in new or existing markets or result inincreased costs in all markets.

 

***If we experience a high rate of wireless customer turnoveror seek to prevent significant customer turnover, our revenues could declineand its costs could increase.***

 

Many wirelessproviders in the U.S. have experienced and have sought to prevent a high rateof customer turnover. We expect that the transition away from Alltel’s muchlarger, nearly nationwide network to our smaller regional network could causeincreased customer turnover, especially within the first year or two of ouroperations.  Increased customer turnovermay occur as a  result of many differentfactors, including limited network coverage, reliability issues such as blockedor dropped calls, handset problems, price competition for service plans orhandset devices, customer care problems such as billing errors or poor customerservice, aggressive marketing campaigns by competitors and other competitivefactors. In addition, customers could elect to switch to another carrier thathas service offerings utilizing a  newernetwork technology. We cannot assure you that our strategies to addresscustomer turnover will be successful. If we experience a high rate of wirelesscustomer turnover or seek to prevent significant customer turnover or fail toreplace lost customers, our revenues could decline and our costs couldincrease, which could have a material adverse effect on our business, financialcondition and operating results.

 

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** **

**Item 2.  UnregisteredSales of Equity Securities and Use of Proceeds**

 

In September2004, the Board of Directors authorized the Company to repurchase up to $5.0million of common stock. The repurchase authorizations do not have a fixedtermination date and the timing of the buyback amounts and exact number ofshares purchased will depend on market conditions.

 

Thefollowing table reflects the repurchases by the Company of its common stockduring the quarter ended March 31, 3010:

 
| **Period**                                | ** ** | **(a)  Total Number  of Shares  Purchased** | ** ** | **(b)  Average  Price  Paid per  Share** | ** ** | **(c)  Total Number of  Shares Purchased  as Part of Publicly  Announced Plans  or Programs** | ** ** | **(d)  Maximum  Number (or  Approximate  Dollar Value) of  Shares that May  be Purchased  Under the Plans or  Programs** | ** ** |
|-------------------------------------------|------------|---------------------------------------------|------------|------------------------------------------|------------|-----------------------------------------------------------------------------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|------------|
| January 1, 2010 — January 31, 2010   |       | —                                      |       | $                                        | —     |                                                                                          | —     |                                                                                                                     | $          | 2,808,173 |   |
| February 1, 2010 — February 28, 2010 |       | —                                      |       | $                                        | —     |                                                                                          | —     |                                                                                                                     | $          | 2,808,173 |   |
| March 1, 2010 — March 31, 2010       |       | —                                      |       | $                                        | —     |                                                                                          | —     |                                                                                                                     | $          | 2,808,173 |   |

 

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**Item6. Exhibits**

 
| 10.1   |   | Amended and  Restated Credit Agreement dated as of January 20, 2010 by and among Atlantic  Tele-Network, Inc., as Borrower, CoBank, ACB, as Administrative Agent,  Arranger, Issuing Lender and a Lender, the Guarantors named therein, and the  other Lenders named therein (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K filed on January 25, 2010 (File No. 001-12593)). |
|--------|--------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2   |   | Amended and  Confirmation Agreement dated as of March 30, 2010 by and among Atlantic  Tele-Network, Inc., as Borrower, CoBank, ACB, as Administrative Agent,  Arranger, Issuing Lender and a Lender, the Guarantors named therein, and the  other Lenders named therein (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K filed on March 30, 2010 (File No. 001-12593)).        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1   |   | Certification of  Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange  Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2   |   | Certification of  Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange  Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1   |   | Certification of  Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                        |
|   |   |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.2   |   | Certification of  Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                        |

 

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** **

**SIGNATURES**

** **

Pursuant to therequirements of the Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned thereunto dulyauthorized.

 
|                | Atlantic  Tele-Network, Inc.           |
|---------------------|----------------------------------------|
|                |                                   |
| Date: May 10,  2010 | /s/ Michael T.  Prior                  |
|                | Michael T. Prior                       |
|                | President and  Chief Executive Officer |
|                |                                   |
| Date: May 10,  2010 | /s/ Justin D.  Benincasa               |
|                | Justin D.  Benincasa                   |
|                | Chief Financial  Officer and Treasurer |

 

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**EXHIBIT INDEX**

 
| **Item  No.** | ** ** | **Description**                                                                                                                                                                                                                                                                                                                                                                                                            |
|---------------|------------|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.1          |       | Amended and  Restated Credit Agreement dated as of January 20, 2010 by and among Atlantic  Tele-Network, Inc., as Borrower, CoBank, ACB, as Administrative Agent,  Arranger, Issuing Lender and a Lender, the Guarantors named therein, and the  other Lenders named therein (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K filed on January 25, 2010 (File No. 001-12593)). |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 10.2          |       | Amended and  Confirmation Agreement dated as of March 30, 2010 by and among Atlantic  Tele-Network, Inc., as Borrower, CoBank, ACB, as Administrative Agent,  Arranger, Issuing Lender and a Lender, the Guarantors named therein, and the  other Lenders named therein (incorporated by reference to Exhibit 10.1 of the  Company’s Current Report on Form 8-K filed on March 30, 2010 (File No. 001-12593)).        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.1          |       | Certification of  Chief Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange  Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 31.2          |       | Certification of  Chief Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange  Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of  2002                                                                                                                                                                                                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.1          |       | Certification of  Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                        |
|          |       |                                                                                                                                                                                                                                                                                                                                                                                                                       |
| 32.2          |       | Certification of  Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted  pursuant to Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                        |

 

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